A government's primary deficit is calculated by excluding which item from total expenditure?
Correct answer: B. Interest payments on public debt
- A. Capital expenditure
- B. Interest payments on public debt
- C. Wages of public employees
- D. Spending on public health
Explanation
The primary deficit equals total expenditure excluding interest payments minus total revenue, or equivalently the overall deficit excluding debt interest. It shows the fiscal position before the cost of servicing past borrowing.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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