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


G is government expenditure

T is government income that is tax revenue

Trade deficit = M - T or (I - S) + (G - T)


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.


Trade deficit = [I - S] + [G - T]

= 2000 + [-1500]

= Rs.500 crores.

Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
view all courses