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    Question

    A country is running a Fiscal Deficit of $500 billion,

    and the government's interest payments on existing debt are $100 billion. If the country has nominal GDP of $20,000 billion, what is the value of the Primary Deficit?
    A $600 billion Correct Answer Incorrect Answer
    B $500 billion Correct Answer Incorrect Answer
    C $400 billion Correct Answer Incorrect Answer
    D $300 billion Correct Answer Incorrect Answer

    Solution

    Solution: The Fiscal Deficit is the difference between total expenditure (including interest payments) and total receipts (excluding borrowing). The Primary Deficit is the fiscal deficit minus interest payments on previous borrowing. It measures the extent of borrowing required for current expenditure. Primary Deficit=Fiscal DeficitтИТInterest Payments Primary Deficit=$500 billionтИТ$100 billion=$400 billion

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