Which statement correctly distinguishes a budget deficit from public debt?
Correct answer: A. A deficit is a yearly flow, while public debt is an accumulated stock
- A. A deficit is a yearly flow, while public debt is an accumulated stock
- B. A deficit is an accumulated stock, while public debt is a yearly flow
- C. A deficit refers only to foreign borrowing, while public debt refers only to domestic borrowing
- D. A deficit is private borrowing, while public debt is household saving
Explanation
A budget deficit measures the shortfall during a particular period, usually one financial year. Public debt is the accumulated outstanding borrowing resulting from past deficits and other borrowing requirements.
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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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