| Consider the following statements: |
| 1. Primary deficit cannot be higher than Fiscal deficit |
| 2. Primary deficit is obtained by deducting interest rates from Revenue deficit. |
| 3. Fiscal deficit cannot be lower than budget deficit. Which of the above statement(s) is/are not correct? |
A) 1 and 2 only
B) 1 and 3 only
C) 2 only
D) 3 only
Correct Answer: C
Solution :
[c] Deficits occur when a government's expenditures exceed the revenue that it generates. The primary deficit is defined as the difference between current government spending on goods and services and total current revenue from all types of taxes net of transfer payments. The total deficit (which is often called the fiscal deficit or just the 'deficit') is the primary deficit plus interest payments on the debt. A mismatch in the expected revenue and expenditure can result in revenue deficit. Revenue deficit arises when the government's actual net receipts is lower than the projected receipts. On the contrary, if the actual receipts are higher than expected one, it is termed as revenue surplus. A revenue deficit does not mean actual loss of revenue.
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