Question
Given the following data for a country: Fiscal
deficit: $50 billion Interest payments: $15 billion Capital expenditure: $25 billion What is the primary fiscal deficit?Solution
Primary fiscal deficit or more commanly referred as primary deficit is calculated as: Primary Fiscal Deficit=Fiscal Deficit−Interest Payments Plugging in the values: Primary Fiscal Deficit=50−15=35. Note – F iscal deficit indicates the government's total borrowing requirements, including interest while Primary Deficit indicates the government's total borrowing requirements, except interest.
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