Which one of the following expenditures is subtracted from Fiscal Deficit to arrive at Primary Deficit ?
- A.Defence expenditure
- B.Expenditure on subsidies
- C.Interest payments
- D.Pension
Correct answer
Explanation
The correct answer is C, Interest payments. Primary deficit is fiscal deficit minus interest payments, so it shows the borrowing a government needs for its current needs alone. Fiscal deficit is the gap between total expenditure and total receipts other than borrowings, which means it equals the government's total borrowing in a year. A large part of that borrowing goes only to pay interest on loans taken in earlier years. Removing interest payments separates the burden of past debt from the present year's fiscal stance; a primary deficit of zero means the government is borrowing only to service old debt. Option A is wrong because defence is a regular part of spending and stays inside the primary deficit. Option B is wrong because subsidies are current spending that is not removed in any deficit measure. Option D is wrong because pensions too are part of committed expenditure and are not subtracted. Exam tip: primary deficit = fiscal deficit − interest payments; revenue deficit = revenue expenditure − revenue receipts.
Practice Questions
View allThe Insolvency and Bankruptcy Board of India (IBBI) was established in the year
- A.2014
- B.2015
- C.2016
- D.2017
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The Insolvency and Bankruptcy Board of India was set up on 1 October 2016 under the Insolvency and Bankruptcy Code, 2016.
Read the full explanation →Consider the following statements : 1. An additional spending by the Government of ₹ X is likely to have less impact on income than an additional transfer of ₹ X to households. 2. An additional spending by the Government of ₹ X is likely to have less impact on income if it is not accompanied by an expansion in money supply. Which of the statements given above is/are correct ?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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Government spending adds to income more than an equal transfer, and its effect is smaller when money supply is not expanded alongside it.
Read the full explanation →Which one of the following central features is not associated with Capitalist Economy?
- A.There is generalised commodity production - it has market value.
- B.Productive wealth is held predominantly in private hands.
- C.Economic life is organised according to market principles.
- D.Economic organisation is based on planning, a supposedly rational process of resource allocation.
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Allocation of resources through central planning is the mark of a socialist or command economy, not a capitalist one. In a capitalist economy, the means of production such as land, factories and capital are owned mainly by private individuals and firms.
Read the full explanation →Consider the following statements:
I. The Second Five-Year Plan sought to promote development which would establish socialistic pattern of society in India.
II. Between 1966 and 1969, three Annual Plans were formulated.
III. The Ninth Five-Year Plan could not take off at its stipulated time in the 60th year of India's Independence.
Which of the statements given above are correct?
- A.I and II only
- B.I and III only
- C.II and III only
- D.I, II and III
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Statements I and II are true, but the Ninth Plan began in 1997, the fiftieth year of Independence, not the sixtieth.
Read the full explanation →According to the National Multi-dimensional Poverty Index (MPI) constructed by the NITI Aayog, a household is considered deprived if 1. a single member of the household is identified as under-nourished 2. the body mass index of a woman member, between 15 years and 49 years of age, is below 18.5 kg/m2 Select the correct answer using the code given below.
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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Under the nutrition indicator, a household is deprived if any one eligible member is undernourished, and a woman of 15 to 49 with a BMI below 18.5 counts as undernourished.
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