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?

Q: Answer-A country is running a Fiscal Deficit of $500 billion, and the government's interest payments on exi...

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 DeficitFiscal DeficitInterest Payments Primary Deficit500 billion100 billion400 billion