Fiscal deficit was 4% of the GDP in 2015 and that increased to 5% in 2016. If the GDP increased by 10% from 2015 to 2016, the percentage increase in the actual fiscal deficit is ___.
37.50
Fiscal Deficit Percentage Increase Explained
Understanding how changes in Gross Domestic Product (GDP) and fiscal deficit percentages affect the actual fiscal deficit is crucial in economic analysis. This problem requires us to calculate the percentage increase in the actual fiscal deficit when both the fiscal deficit as a percentage of GDP and the GDP itself have increased over a period.
Understanding the Given Fiscal Deficit Data
Let's first break down the information provided for the years 2015 and 2016.
| Year | Fiscal Deficit as % of GDP | GDP Growth from 2015 |
|---|---|---|
| 2015 | 4% | - |
| 2016 | 5% | 10% increase |
Our goal is to find the percentage increase in the actual fiscal deficit from 2015 to 2016. To do this, we can assume a base value for the GDP in 2015 to make the calculations straightforward.
Step-by-Step Fiscal Deficit Analysis
Fiscal Deficit in 2015
Let's assume the GDP in 2015 to be \( \text{Rs. } 100x \). We use \(100x\) to simplify calculations involving percentages.
- GDP in 2015 \( (G_{2015}) = 100x \)
- The fiscal deficit in 2015 was 4% of the GDP.
-
So, Actual Fiscal Deficit in 2015 \( (FD_{2015}) = 4\% \text{ of } 100x \)
\( FD_{2015} = \frac{4}{100} \times 100x = 4x \)
GDP and Fiscal Deficit in 2016
Next, we calculate the GDP for 2016 and then the corresponding fiscal deficit for 2016.
- The GDP increased by 10% from 2015 to 2016.
-
GDP in 2016 \( (G_{2016}) = G_{2015} + 10\% \text{ of } G_{2015} \)
\( G_{2016} = 100x + \frac{10}{100} \times 100x = 100x + 10x = 110x \)
- The fiscal deficit in 2016 was 5% of the 2016 GDP.
-
So, Actual Fiscal Deficit in 2016 \( (FD_{2016}) = 5\% \text{ of } 110x \)
\( FD_{2016} = \frac{5}{100} \times 110x = 0.05 \times 110x = 5.5x \)
Calculating Percentage Increase in Fiscal Deficit
Now we have the actual fiscal deficit values for both years:
- Actual Fiscal Deficit in 2015 \( = 4x \)
- Actual Fiscal Deficit in 2016 \( = 5.5x \)
To find the percentage increase, we use the formula:
\( \text{Percentage Increase} = \left( \frac{\text{New Value} - \text{Old Value}}{\text{Old Value}} \right) \times 100 \)
Substituting our values:
\( \text{Percentage Increase in Fiscal Deficit} = \left( \frac{FD_{2016} - FD_{2015}}{FD_{2015}} \right) \times 100 \)
\( = \left( \frac{5.5x - 4x}{4x} \right) \times 100 \)
\( = \left( \frac{1.5x}{4x} \right) \times 100 \)
The \(x\) terms cancel out, leaving:
\( = \left( \frac{1.5}{4} \right) \times 100 \)
\( = 0.375 \times 100 \)
\( = 37.5\% \)
Final Result and Conclusion
The percentage increase in the actual fiscal deficit from 2015 to 2016 is 37.50%. This shows that even a small increase in the fiscal deficit percentage coupled with GDP growth can lead to a significant increase in the absolute fiscal deficit amount.
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