Question

Fiscal deficit was 4% of the GDP in 2015, and that increased to 5% in 2016. If the GDP increased by 10% from 2015 to 2016, then percentage increase in the actual fiscal deficit is _____

• A. 25.00
• B. 35.70
• C. 10.00
• D. 37.50

Answer 1

The correct option is D 37.50

Let GDP in 2015 = 100

GDP in 2016 = 100 + 10 = 110

Deficit in 2015 = 4

Deficit in 2016 = 5% of 110 = 5.5

Percentage increase in fiscal deficit
$=\frac{5.5-4}{4}\times 100$
$=\frac{1.5}{4}\times 100=37.5$