Sandeep Garg Macroeconomics Class 12- Chapter 10: Government Budget and the Economy

Sandeep Garg Class 12 Macroeconomics Solutions Chapter 10: Government Budget and the Economy are explained by the expert economics teachers from the latest edition of Sandeep Garg Macroeconomics Class 12 textbook solutions.

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There are numerous concepts in economics, but here we provide you the solutions from, Government Budget and the Economy, which will be useful for the students to score well in the board exams.

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

Explore link: Excess Demand and Deficient Demand

Question 5

From the given table, Find the following:

(a) Fiscal deficit

(b) Primary 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

1. Fiscal deficit = Borrowings = ₹15,000 crores
2. 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

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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