Government Budget and the Economy
Expert economics teachers clarify Chapter 10: Government Budget and the Economy from the latest edition of Sandeep Garg Macroeconomics Class 12 textbook solutions.
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Sandeep Garg Solutions Class 12: Chapter 10: Part B
Question 1
In a government budget, the revenue deficit is ₹35 crores. If the revenue receipts are ₹70 crores and capital expenditure is ₹120 crores, then how much is the revenue expenditure?
Solution:
Revenue deficit = Revenue expenditure – Revenue receipt
₹35 crores = Revenue expenditure – ₹70 crores
Revenue Expenditure = ₹35 crores + ₹70 crores
= ₹105 crores
Question 2
The interest requirement as per the government budget during a year is ₹1,40,000 crores. If the total borrowing requirements of the government are estimated at ₹2,70,000 crores, then how much is the primary deficit?
Solution:
Total borrowing requirements of the government are estimated at ₹2,70,000 crores. It means,
Fiscal deficit = ₹2,70,000
Primary deficit = Fiscal deficit – Interest payment
Primary deficit = ₹2,70,000 crores – ₹1,40,000 crores
= ₹1,30,000 crores
Question 3
In a government budget, the primary deficit is ₹12,000 crores and interest payment is ₹7,000 crores. How much is the fiscal deficit?
Solution:
Primary deficit = Fiscal deficit – Interest payment
₹12,000 crores = Fiscal deficit – ₹7,000 crores
Fiscal deficit = ₹12,000 crores + ₹7,000 crores
= ₹19,000 crores
Question 4
As per the government budget, the interest payments are estimated at ₹10,000 crores, which is 40% of the primary deficit. Calculated the fiscal deficit.
Solution:
Let primary deficit = x
₹10,000 crores = 40% of x = 0.40 x
x= ₹10,000 crores/0.40 = ₹25,000 crores
Primary deficit = Fiscal deficit – Interest payment
₹25,000 crores = Fiscal deficit – ₹10,000 crores
Fiscal deficit = ₹25,000 crores + ₹10,000 crores
= ₹35,000 crores
Question 5
From the given table, Find the following:
(a) Fiscal deficit
(b) Primary deficit
| Particulars | (₹ in crores) |
| Revenue expenditure Borrowings Revenue receipt Interest payment | 70,000 15,000 50,000 25% of revenue deficit |
Solution:
Revenue deficit = Revenue expenditure – Revenue receipt
Revenue deficit = ₹70,000 crores – ₹50,000 crores = ₹20,000 crores
Interest payment = 25% of revenue deficit = ₹20,000 crores x 25/100[1]
= ₹5,000 crores
- Fiscal deficit = Borrowings = ₹15,000 crores
- Primary deficit = Fiscal deficit – Interest payment
Primary deficit = ₹15,000 crores – ₹5,000 crores
= ₹10,000 crores
Question 6
From the given information, determine the following:
(a) Capital expenditure
(b) Total expenditure
(c) Interest payments
| Particulars | (₹ in crores) |
| Fiscal deficit Revenue deficit Primary deficit Revenue receipts Non-debt capital receipts | 12,000 9,000 5,000 6,000 10,000 |
Solution:
(a) Fiscal deficit = Revenue deficit + (Capital expenditure – Non-debt creating capital receipts)
₹12,000 crores = ₹9,000 + (Capital expenditure – ₹10,000
Capital expenditure = ₹12,000 crores – ₹9,000 crores + ₹10,000 crores
= ₹13,000 crores
(b) Total expenditure = Revenue expenditure + Capital expenditure
Revenue expenditure = Revenue deficit + Revenue receipt
= ₹9,000 crores + ₹6,000 crores
= ₹15,000 crores
Total expenditure = Revenue expenditure + Capital expenditure
= ₹15,000 crores + ₹13,000 crores
= ₹28,000 crores
(c) Primary deficit = Fiscal deficit – Interest payments
₹5,000 crores = ₹12,000 crores – Interest payments
Interest payments = ₹12,000 crores – ₹5,000 crores
= ₹7,000 crores
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