Question

Fiscal Deficit occurs when :

• A. Government Expenditure exceeds Government Revenue (Excluding Borrowings)
• B. Government Revenue exceeds Government Expenditure
• C. Both Government Expenditure and Government Revenue are the same.
• D. Government Expenditure exceeds GDP.

Hint:

Fiscal deficit is the gap that the government fills by borrowing.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
Fiscal deficit shows how much the government must borrow in a year to meet its spending.

Step 2: Key Formula:
Fiscal Deficit = Total Expenditure - (Revenue Receipts + Non-debt Capital Receipts). In simple words, it is spending minus income excluding borrowings.

Step 3: Check option 2.
If revenue is more than expenditure, there is a surplus, not a deficit. So option 2 is wrong.

Step 4: Check option 3.
If both are equal, the budget is balanced. So option 3 is wrong.

Step 5: Check option 4.
Spending above GDP is not the meaning of fiscal deficit and is almost never seen. So option 4 is wrong.

Step 6: Check option 1.
Spending above income, without counting borrowings, is exactly the fiscal deficit. So option 1 is correct.

Final Answer:
Fiscal deficit occurs when government expenditure exceeds its revenue excluding borrowings. This is option 1. \[ \boxed{\text{Option 1}} \]