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
GDP is a rough measure of the size of the overall economy to provide some scale. There are a host of other metrics you could use.
If I tell you a country has a $10 billion deficit, is that good or bad? If you’re the United States with a $25 trillion GDP, that wouldn’t even register. If you’re Fiji and your country is only producing $4.9 billion worth of stuff in a year, you’re gonna have a bad time.
Latest Answers