Question

Which of the following flowchart is incorrect?

• A. $\begin{array}{c}\text{Fiscal Deficit}\\ =\\ \text{Total Expenditure}\\ -\\ \text{Total Receipts excluding borrowings}\end{array}$
• B. $\begin{array}{c}\text{Fiscal Deficit}\\ =\\ \text{Revenu Deficit}\\ +\\ \text{Capital Expendilure}\end{array}$
• C. $\begin{array}{c}\text{Fiscal Deficit}\\ =\\ \text{Revenu Deficit}\\ +\\ \text{Capital Expendilure}\\ -\\ \text{Total Receipts excluding borrowings}\end{array}$
• D. $\begin{array}{c}\text{Fiscal Deficit}\\ =\\ \text{Total Expenditure}\\ -\\ \text{Revenu Receipts}\\ -\\ \text{Capital Recipts excluding borrowings}\end{array}$

Answer 1

Answer: (B)

$\begin{array}{c}\text{Fiscal Deficit}\\ =\\ \text{Revenu Deficit}\\ +\\ \text{Capital Expendilure}\end{array}$

Fiscal deficit refers to a situation when government's total expenditure exceeds the total receipts. Therefore, fiscal deficit of the government is estimated by subtracting total receipts from total expenditure. Thus, fiscal deficit cannot be the sum total of revenue deficit and capital expenditure.