Question : Which of the following expressions is correct?
Option 1: Gross Primary Deficit = Gross Fiscal Deficit + Net Interest Liabilities
Option 2: Gross Primary Deficit = Gross Fiscal Deficit – Net Interest Liabilities
Option 3: Gross Primary Deficit = Gross Fiscal Deficit ÷ Net Interest Liabilities
Option 4: Gross Primary Deficit = Gross Fiscal Deficit × Net Interest Liabilities
Correct Answer: Gross Primary Deficit = Gross Fiscal Deficit – Net Interest Liabilities
Solution : The correct answer is Gross Primary Deficit = Gross Fiscal Deficit – Net Interest Liabilities.
The Gross Fiscal Deficit less interest payments is the Gross Primary Deficit. Net Fiscal Deficit less Net Interest Payments equals Net Primary Deficit. While the primary deficit shows the total amount borrowed by the government without interest payments, the fiscal deficit shows the total amount borrowed by the government with interest included.
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