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    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?

    A $35 billion Correct Answer Incorrect Answer
    B $25 billion Correct Answer Incorrect Answer
    C $15 billion Correct Answer Incorrect Answer
    D $10 billion Correct Answer Incorrect Answer

    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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