Q. Consider the following statements:
1. A fiscal deficit (FD) situation occurs when the government’s income exceeds its expenditure.
2. It is the difference between the total expenditure of the government and its total revenue (excluding borrowings).
Which of the statements given above is/are correct?
Answer: B
Notes:
Explanation: About Twin Deficit:
A twin deficit refers to a situation where an economy runs relatively large Current Account and Fiscal deficits. A higher twin deficit is inherently destabilizing and was the primary reason why India faced a currency crisis back in 1991.
About Fiscal Deficit
A fiscal deficit (FD) situation occurs when the government’s expenditure exceeds its income. It is the difference between the total expenditure of the government and its total revenue (excluding borrowings).
It indicates the extent by which government spending exceeds its income and the total borrowings needed by it to fill this gap.
Source: EPIC July 2022
