Question

Fiscal deficit refers to the

• A. final revenue deficit of the government
• B. actual deficit of the government
• C. deficit related to non-tax revenue
• D. none of these

Hint:

Fiscal deficit is total spending minus receipts other than borrowing, so it shows the government's real overall borrowing need.

Answer 1

The Correct Option is B

This question is testing the definition of fiscal deficit, a core public finance term. Let's check what each option claims.

1. Final revenue deficit of the government: Revenue deficit is a narrower measure, it only compares revenue receipts with revenue expenditure and ignores capital spending and borrowing. It is not the same as fiscal deficit.
2. Actual deficit of the government: Fiscal deficit equals total government spending minus total receipts other than borrowings. Since this exactly represents how much the government actually needs to borrow to cover all its spending, it is best described as the actual, overall deficit. This is correct.
3. Deficit related to non-tax revenue: Fiscal deficit is not confined to non-tax revenue; it factors in all receipts and all expenditure. This option is too narrow.
4. None of these: Since option (2) correctly matches the definition, this does not apply.

So fiscal deficit is best understood as the government's actual, total deficit, which also equals its net borrowing requirement.

Let's summarize:

• Fiscal deficit equals total expenditure minus total receipts excluding borrowings.
• It shows how much the government must borrow overall, unlike the narrower revenue deficit.

The right answer is option (2), the actual deficit of the government.