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Difficulty: MediumGovernment Budgets and Budgetary Control

In a financial year, a government collected ₦650 billion\text{₦}650\text{ billion} in tax revenue and ₦180 billion\text{₦}180\text{ billion} in non-tax revenue. During the same period, its recurrent expenditure was ₦520 billion\text{₦}520\text{ billion} and its capital expenditure was ₦460 billion\text{₦}460\text{ billion}. What is the government's budget deficit in billions of Naira (₦\text{₦})?

Answer: 150 billion Naira

Answer

The government's budget deficit is ₦150 billion\text{₦}150\text{ billion}.
The budget deficit represents the excess of total expenditure over total revenue in a fiscal period. Adding tax revenue (₦650 billion\text{₦}650\text{ billion}) and non-tax revenue (₦180 billion\text{₦}180\text{ billion}) gives a total revenue of ₦830 billion\text{₦}830\text{ billion}. Adding recurrent expenditure (₦520 billion\text{₦}520\text{ billion}) and capital expenditure (₦460 billion\text{₦}460\text{ billion}) yields a total expenditure of ₦980 billion\text{₦}980\text{ billion}. The difference (₦980 billion−₦830 billion\text{₦}980\text{ billion} - \text{₦}830\text{ billion}) results in a budget deficit of ₦150 billion\text{₦}150\text{ billion}.

Step-by-Step Solution

1
Calculate Total Revenue
Total Revenue = ₦830 billion\text{₦}830\text{ billion}
Total revenue is the sum of tax revenue and non-tax revenue: ₦650 billion+₦180 billion=₦830 billion\text{₦}650\text{ billion} + \text{₦}180\text{ billion} = \text{₦}830\text{ billion}.
2
Calculate Total Expenditure
Total Expenditure = ₦980 billion\text{₦}980\text{ billion}
Total expenditure is the sum of recurrent expenditure and capital expenditure: ₦520 billion+₦460 billion=₦980 billion\text{₦}520\text{ billion} + \text{₦}460\text{ billion} = \text{₦}980\text{ billion}.
3
Calculate Budget Deficit
Budget Deficit = ₦150 billion\text{₦}150\text{ billion}
A budget deficit occurs when total expenditure exceeds total revenue. Deficit = Total Expenditure - Total Revenue = ₦980 billion−₦830 billion=₦150 billion\text{₦}980\text{ billion} - \text{₦}830\text{ billion} = \text{₦}150\text{ billion}.

Key Concept

Budget Deficit Calculation
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Topics

Government Budgets and Budgetary Control

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