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Question -

Define budget deficit and trade deficit. The excess of private investment over saving of a country in a particular year was Rs 2,000 crores. The amount of budget deficit was (-) Rs 1,500 crores. What was the volume of trade deficit of that country? 



Answer -

Budget deficit. It measures the amount by which the government expenditure exceeds the tax revenue earned by it. Budget Deficit = G – T.
Trade deficit: It measures the amount of excess expenditure over the export revenue earned by the country.
Trade Deficit = M – X
Given G – T = (-) Rs 1500 crore
Investment – Saving = Rs 2000 crore Trade deficit = [I – S] + [G – T]
= [2000]+ [-1500] = Rs 500 crore.

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