Practicing Success
Which deficit includes only such transactions that affect the current income and expenditure of the government ? |
Revenue deficit Fiscal deficit Primary deficit Budget deficit |
Revenue deficit |
The correct answer is option (1) : Revenue deficit The deficit that includes only such transactions that affect the current income and expenditure of the government is the (1) Revenue deficit. A revenue Deficit occurs when the government's total revenue (mainly from taxes and non-debt capital receipts) is less than its total current expenditure (expenses incurred on items like salaries, pensions, subsidies, and other operational costs). It reflects a situation where the government's regular income (revenue) is insufficient to cover its everyday expenses. Revenue deficit focuses on the operational part of the government's budget. In contrast, the other deficits mentioned include a broader set of financial transactions : 1. Fiscal Deficit includes all revenue and capital transactions, both income and expenses, and is an indicator of the government's overall financial health. 2. Primary Deficit focuses on the fiscal deficit minus interest payments. It excludes interest expenses from the calculation and provides a clearer view of the government's fiscal health, excluding the cost of servicing its debt. 3. Budget Deficit can be a more general term, referring to any situation where a budget's total expenses exceed its total revenues. It encompasses various types of deficits, including revenue deficit and fiscal deficit, depending on the context. |