Q. 6
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 means when the amount by which government expenditure exceeds the tax revenue earned by government and trade deficit means when the amount of import expenditure exceeds the export revenue earned by the economy.
Budget deficit = G - T
Where,
G is government expenditure
T is government income that is tax revenue
Trade deficit = M - T or (I - S) + (G - T)
Where,
M is import expenditure
T is export revenue
I is Investment X Inflow into the country
S is saving
It is given that,
I - S = Rs.2000 crores.
G - T = (-) Rs.1500 crores.
Therefore,
Trade deficit = [I - S] + [G - T]
= 2000 + [-1500]
= Rs.500 crores.
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PREVIOUSWrite down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP.NEXTSuppose the GDP at market price of a country in a particular year was Rs 1,100 crores. Net Factor Income from Abroad was Rs 100 crores. The value of Indirect taxes – Subsidies was Rs 150 crores and National Income was Rs 850 crores. Calculate the aggregate value of depreciation.
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