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The following budget data are for a country having both a central government and provincial governments: Central purchases of goods and services Provincial purchases of goods and services Central transfer payments Provincial transfer payments Grants in aid (central to provincial) Central tax receipts Provincial tax receipts Interest received from private sector by central government Interest received from private sector by provincial governments Total central government debt Total provincial government debt Central government debt held by provincial governments Nominal interest rate 350 225 150 40 75 350 100 30 20 1200 100 150 10%
The following budget data are for a country having both a central government and provincial governments: Central purchases of goods and services Provincial purchases of goods and services Central transfer payments Provincial transfer payments Grants in aid (central to provincial) Central tax receipts Provincial tax receipts Interest received from private sector by central government Interest received from private sector by provincial governments Total central government debt Total provincial government debt Central government debt held by provincial governments Nominal interest rate 350 225 150 40 75 350 100 30 20 1200 100 150 10%
Expert Solution
A). Answer:
Fiscal deficit = Total Expenditure – Total receipts ( Revenue receipts – Capital receipts) excluding borrowings
Primary deficit = Fiscal deficit – Interest payments
The overall deficit for the central government equals=
Total Expenditure (the central government) = 350 + 150 + 75 + 120 + 15 = 710
Total Receipt (the central government) = 350 + 30 = 380
Fiscal deficit = 710 - 380 = 330
The overall deficit for the provincial governments equals
Total Expenditure = 225 + 40 + 10 = 275
Total Receipt = 75 + 100 + 20 + 15 = 210
Fiscal deficit = 275 - 210 = 65
B). Answer:
The primary deficit for the central government = 330 - 135 = 195
The primary deficit for the provincial governments = 65 - 10 = 55
C). Answer:
The overall deficit for the combined governments = 330 + 65 = 395
The primary deficit for the combined governments equals = 195 + 65 = 260
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