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 numbers are super large, and using a percentage allows them to get into a couple of digits so people understand them better.
The other analogy is to your personal income. If you make $50K/year, then a $30K car loan might cost you 10% of your income in payments. If you company president makes $500K/year then the payments on his $300K Lamborghini is about the same percentage of income. It’s not that his Lambo is the same price as your Honda, but it’s the same fraction of what he has available to spend.
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