alleryStart learning →Primary deficit is obtained by subtracting which item from the fiscal deficit?
ACapital expenditure
BMajor subsidies
CNet interest liabilities
DTotal tax revenue
Answer & Solution
Correct answer: C. Net interest liabilities
1. Fiscal deficit includes interest owed on debt already accumulated.
2. To see the *current* fiscal imbalance, that interest burden is removed.
3. Primary deficit = fiscal deficit - **net interest liabilities**.
4. Net interest liabilities are interest payments minus interest receipts on net domestic lending.
_Source: syllabus Introductory Macroeconomics, Ch 5 "Government Budget and the Economy", section 5.2.1 Measures of Government Deficit_
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