question archive 1)What is budget deficit, fiscal deficit and revenue deficit? 2)What is the difference between revenue deficit, fiscal deficit, and primary deficit, in the layman's terms?
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1)What is budget deficit, fiscal deficit and revenue deficit?
2)What is the difference between revenue deficit, fiscal deficit, and primary deficit, in the layman's terms?
1)A budget deficit is a loss that the government incurs when it's spending exceeds the revenue it collects from taxes. Fiscal deficit also includes money borrowed and interest accrued from borrowing that interest. Therefore, fiscal deficit is larger than the budget deficit. Finally, revenue deficit is when the amount of revenue that is actually collected by the government is less than the amount of revenue they expected to collect.
2)Revenue deficit refers to the excess of the total revenue expenditure over total revenue receipts in a given year. It signifies that the government is not receiving enough revenue and may borrow money in the future. A high revenue deficit means that the government will either curtail its expenditure or increase the tax rates in order to increase its revenue to finance the expenditure.
The fiscal deficit reflects the excess of total budget expenditure over total budget receipts excluding borrowings in a given fiscal year. Basically, it is the amount of borrowings that government takes to meet its expenditure.
Primary deficit equals the fiscal deficit of the current year less the interest amount paid on previous year's borrowings. A zero primary deficit means that the government must have to borrow only to make interest payments.