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Deficit spending, in the short term can get the country (or any person or company) through a time period where income (revenue) is less than the expenses. But in the long run, if not corrected, the problem (added debt) gets worse (more debt) rather than improving the situation.
For example, take (for simplicity) somebody making 24000 per year. Suppose the person only spends (food, room, car payment, taxes etc) 23000 per year.
They can save the 1000 surplus or maybe like many people, it probably came to them as a tax refund after filing their taxes. They think it's extra money and maybe they buy something nice, or whatever.
Suppose now that the person's rent goes up, or gas prices increase, or a number of reasons, and now his expenses are 25,000 per year. So they will have to borrow the 1000 from somewhere (like a credit card). Say the person makes some cutbacks somewhere (maybe eating out less) and comes up with an extra 200 to make the credit card payments. Not counting interest, their expenses are 24800, then 200 to pay down the debt, but they are still only making 24000, so they need to borrow an additional 800 to cover the deficit. The cycle will continue to expand (and remember this did not even take into the effect of compounding interest).
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What is primary deficit?
Primary deficit is the gross deficit which is obtained by subtracting interest payments from budget deficit of any country of a particular year. We need to know the value of primary deficit, while calculating the fiscal deficit.Alternative Definition of Primary DeficitPrimary deficit corresponds to the net borrowing, which is required to meet the expenditure excluding the interest payment.Primary Deficit = (Fiscal Deficit - Interest Payment)Statistical reports: Primary deficit ( in India)In the fiscal year 1999-2000: primary deficit was (-) Rs.2598.72 croreIn the fiscal year 2000-2001: primary deficit was (-) Rs.1038.38 croreIn the fiscal year 2001-2002: primary deficit was (-) Rs.2598.72 croreOver the last few year the fiscal status of India has improved. In the fiscal year 2006-07, the revenue deficit in India was 2%, primary deficit was 0.1% and fiscal deficit was 3.7 percent. The government of India budget for 2007-08 predicts a revenue deficit of 1.5%, primary deficit of -0.2% and fiscal deficit of 3.3 percent.
Why fiscal deficit is good for the country?
Fiscal deficit is said to be good for the country as it helps the country to climb out of a recession.
What is fiscal consolidation?
Fiscal consolidation is a policy aiming at reducing fiscal deficit of government .
What is the difference among fiscal deficit budget deficit revenue deficit and trade deficit?
fiscal deficit: not enough money budget deficit: not as much money as you had planned to have in your budget revenue deficit: not enough money coming in trade deficit: you are spending more money on imports than the amount of money which you receive for your exports.
Whether fiscal deficit is always bad?
Fiscal deficit is not always bad.... deficit arises from two parts - capital deficit and revenue deficit. now revenue deficit is obviously bad for economy stating that we are not able to pull money sufficient to meet our revenue and there is no asset creation. on the other hand if major fiscal deficit is coming from capital deficit its not all that a bad news. after all asset creation is taking place. n such moves are welcome.
What is primary deficit?
Primary deficit is the gross deficit which is obtained by subtracting interest payments from budget deficit of any country of a particular year. We need to know the value of primary deficit, while calculating the fiscal deficit.Alternative Definition of Primary DeficitPrimary deficit corresponds to the net borrowing, which is required to meet the expenditure excluding the interest payment.Primary Deficit = (Fiscal Deficit - Interest Payment)Statistical reports: Primary deficit ( in India)In the fiscal year 1999-2000: primary deficit was (-) Rs.2598.72 croreIn the fiscal year 2000-2001: primary deficit was (-) Rs.1038.38 croreIn the fiscal year 2001-2002: primary deficit was (-) Rs.2598.72 croreOver the last few year the fiscal status of India has improved. In the fiscal year 2006-07, the revenue deficit in India was 2%, primary deficit was 0.1% and fiscal deficit was 3.7 percent. The government of India budget for 2007-08 predicts a revenue deficit of 1.5%, primary deficit of -0.2% and fiscal deficit of 3.3 percent.
Why fiscal deficit is good for the country?
Fiscal deficit is said to be good for the country as it helps the country to climb out of a recession.
What is fiscal consolidation?
Fiscal consolidation is a policy aiming at reducing fiscal deficit of government .
What is primary deficit in a budget?
Primary deficit=Fiscal deficit-[minus] Interest payments
What is the reason for fiscal deficit in India?
The fiscal deficit in India is not fundamentally different from the fiscal deficit in any other country. The public always wants more government spending but they do not want more government taxes. The government attempts to oblige, by borrowing money. The result is a deficit.
What is the difference among fiscal deficit budget deficit revenue deficit and trade deficit?
fiscal deficit: not enough money budget deficit: not as much money as you had planned to have in your budget revenue deficit: not enough money coming in trade deficit: you are spending more money on imports than the amount of money which you receive for your exports.
Whether fiscal deficit is always bad?
Fiscal deficit is not always bad.... deficit arises from two parts - capital deficit and revenue deficit. now revenue deficit is obviously bad for economy stating that we are not able to pull money sufficient to meet our revenue and there is no asset creation. on the other hand if major fiscal deficit is coming from capital deficit its not all that a bad news. after all asset creation is taking place. n such moves are welcome.
Distinguish between deficit budget and surplus budget?
The main difference between the fiscal and budget deficit is of time period in consideration.Fiscal Deficit is the Govt. Deficit (Government Expenditures - Government Earnings (excluding borrowings)) for a fiscal year let say 2008-09 while...Budget Deficit is the Govt. Deficit in fiscal year 2008-09 (i.e. fiscal deficit for year 2008-09) plus the past Debt over the Government (i.e. the net sum of all past Fiscal deficit/surplus before fiscal year 2008-09).
What is India's current deficit rete?
India's fiscal deficit amounts to 4.5% or 1,39231 crore ($32b).
What is called deficit spending?
expansionary fiscal policy position
What does fiscal mean?
Fiscal usually relates to matters of financial stature. Fiscal could also relate to taxes and government issues. The use of the word fiscal can be combined in conjunction with fiscal cliff, fiscal year, fiscal deficit, fiscal policy and fiscal parish.
How is the deficit different than the national debt?
The deficit only includes shortfalls in the budget for the current fiscal year.
