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MACROECONOMICS ASSIGNMENT #1
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What Is the Meaning of Fiscal Deficit?
DEFINITION:
“When a government's total expenditures exceed the revenue that it generates (excluding
money from borrowings.”
http://www.answers.com/topic/fiscal-deficit#ixzz1EnXOALuY
CAUSES:
Economic conditions, along with public policy changes that reduce government revenues or
boost spending, produce fiscal deficits.
MISCONCEPTIONS:
A fiscal deficit differs from a country's national debt. A fiscal deficit is a yearly measure of the
gap between expenditures and revenues. The national debt is the sum of all accumulated
deficits, on which the government must pay interest to finance past borrowing.
EFFECTS:
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What Is the Meaning of BALANCE OF TRADE?
DEFINITION:
“The difference between a country's imports and its exports is its balance of trade. Balance of
trade is the largest component of a country's balance of payments. Debit* items include
imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit**
items include exports, foreign spending in the domestic economy and foreign investments in the
domestic economy. A country has a trade deficit if it imports more than it exports; the opposite
scenario is a trade surplus.”
http://www.investopedia.com/terms/b/bot.asp
*Debit: An accounting entry which results in either an increase assets or a decrease in liabilities/net
worth.
**Credit: An accounting entry which results in either an increase liabilities or a decrease in assets.
1. Trade Deficit
2. Trade Surplus
TRADE DEFICIT:
“The trade deficit is when the value of imports is greater than the value of exports.”
http://useconomy.about.com/od/glossary/g/Trade_Deficit.htm
TRADE SURPLUS:
“The trade surplus is when the value of exports is greater than the value of imports.”
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PAKISTAN’S FISCAL DEFICIT
As a Percentage of GDP
ksereports.serveftp.net/2010/December/31_12_10/AHCM/Pakistan%20economy%20update_Fiscal%20Deficit-
FY2011.pdf
The data in this table shows that from 2005 to 2010, Pakistan’s fiscal deficit has been on a rise,
with the exception of the 2008-2009 period, during which the government was able to bring it
down from PKR 777 bn. to PKR 680 bn. Though the total revenue increased at a gradual rate, so
did the total expenditures, and at a faster rate than the revenue. As a result, Pakistan
underwent fiscal deficit.
A comparison of the 5 years of the fiscal position of Pakistan, from 2005 to 2010, shows that
the economic manager were most successful in keeping the deficit low in the ear 2005-06.
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PAKISTAN’S trade balance
http://www.tradingeconomics.com/Economics/Balance-of-Trade.aspx?Symbol=PKR
Pakistan reported a trade deficit equivalent to 1348 Million USD in November of 2010.
Pakistan exports rice, furniture, cotton fiber, cement, tiles, marble, textiles, clothing, leather
goods, carpets and rugs and food products. Pakistan imports mainly petroleum, petroleum
products, machinery, plastics, transportation equipment, edible oils, paper and paperboard,
iron and steel and tea. Its main trading partners are: European Union, China, The United Arab
Emirates and The United States.
It can be observed from the figure that Pakistan has been consistently in a condition of trade
deficit during the 2005 to 2010 period. The 2008-2009 period witnessed record low levels of
trade deficit, with the balance of trade dropping as low as around USD -2500 million.
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