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    Question

    Which of the following statements correctly distinguish

    Fiscal Deficit from Revenue Deficit ?  Fiscal Deficit is the excess of total expenditure over total revenue, including borrowing, while Revenue Deficit excludes capital expenditure.  A high Fiscal Deficit indicates excessive borrowing by the government, while Revenue Deficit suggests lower tax or non-tax revenue collection.  Fiscal Deficit is always undesirable for economic growth, while Revenue Deficit can sometimes be beneficial. 
    A 1 and 2 only Correct Answer Incorrect Answer
    B 2 and 3 only Correct Answer Incorrect Answer
    C 1 and 3 only Correct Answer Incorrect Answer
    D 1, 2, and 3 Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    • Statement 1 is correct: Fiscal Deficit includes borrowing, while Revenue Deficit is the gap in regular income and expenses (excluding capital expenditure). 
    • Statement 2 is correct: High Fiscal Deficit reflects excessive government borrowing, while Revenue Deficit signals inadequate revenue collection. 
    • Statement 3 is incorrect: Fiscal Deficit can be beneficial if used for productive investments (infrastructure, growth), but Revenue Deficit generally reflects inefficient spending. 

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