Answer to Question #198660 in Macroeconomics for Ishika Sinha

Question

Suggest measures to improve gross fiscal deficit

Answer 1

Solution:

Gross fiscal deficit refers to the excess of total expenditure inclusive of loans net of recovery over revenue receipts, including external grants and non-debt capital receipts.

The government can improve the gross fiscal deficit through fiscal consolidation by adopting the following measures:

·        Increasing revenue and improving tax revenue realization. The government should also increase the efficiency of tax administration by reducing tax avoidance, eliminating tax evasion, and enhancing tax compliance. The government should also increase taxes for goods and services with inelastic demand, including widening the tax base to increase revenues, improving the gross fiscal deficit.

·        The government should reduce spending on unnecessary things to reduce its expenditure budget. They should cut spending on areas that do not create many jobs.

·        The government should increase economic growth by boosting demand, increasing government spending, offering incentives and subsidies, and cutting taxes on some areas.