Question:
Primary account balance of the government budget is defined as the difference between
(1) tax revenue and capital expenditure.
(2) total revenue including grants and total expenditure excluding interest payments on debt.
(3) total revenue and total expenditure including repayment of debt.
(4) tax revenue and recurrent expenditure.
(5) total revenue and recurrent expenditure.
Correct Answer:
(2)
Answer Explanation:
The primary balance indicates the government’s current fiscal effort. It is calculated by taking the overall budget balance (Total Revenue + Grants minus Total Expenditure) and adding back the interest payments on accumulated historical debt. This shows if the government can cover its current operations without borrowing.
Topic: Public Finance Year: 2019
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