Question

‘A large fiscal deficit leads to a higher revenue deficit in future.’ Do you agree with the statement? Give reasons
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Answer 1

Answer:

Hey Mate !

Large borrowings to meet revenue deficit will increase debt burden due to repayment liability and interest payments. This may lead to larger and larger revenue deficits in future.

A government experiences a fiscal deficit when it spends more money than it takes in from taxes and other revenues excluding debt over some time period.An increase in the fiscal deficit, in theory, can boost a sluggish economy by giving more money to people who can then buy and invest more.

Explanation:

Hope it helps u

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Answer 2

'A large fiscal deficit leads to a higher revenue deficit in future'.

• The difference between a government's total revenue and total expenditures for a given fiscal year is known as the fiscal deficit. A fiscal deficit occurs when a government's spending exceeds its revenue in a given fiscal year, which can happen as a result of a significant rise in expenditures on capital spending or a revenue deficit.

• A fiscal year is used in government accounting, which differs by country, and for budgetary considerations. Furthermore, corporations and other organizations use it for financial reporting.

• Because interest payments are revenue expenditures, as government borrowing grows, so does the government's obligation to pay back the loans with interest in the future. This causes an increase in revenue deficit. Thus Future revenue deficits are exacerbated by a significant fiscal imbalance.

Therefore, it is said that 'a large fiscal deficit leads to a higher revenue deficit in future'.

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