I was recently reading news on India’s interim budget and I read something that by 2025 they (the country) expect fiscal deficit to be x% of GDP, and it had me confused.
How is GDP, which a metric for production and exports imports within a country, an appropriate base for fiscal deficit?
In: Economics
The simplest way to put it is, if you (assuming you’re a relatively average person) have a debt of $5,000 and Bill Gates has a debt of $100,000, who has a greater concern with debt?
Probably you, because Bill Gates has far more money available to him than you, even if the debt is far higher. So instead of presenting debt on its own, you use debt as percent of earnings.
It provides context for debt between countries earning a different amount
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