GATE Mechanical 2019 Set 2 | GA | Question: 6

Question

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 ____

• A. $37.50$
• B. $35.70$
• C. $25.00$
• D. $10.00$

Comments

let GDP be 100 in 2015 then fiscal deficit is 4% so it would be 4.

Now GDP increase by 10% in 2016  so the GDP now will be 110

and fiscal deficit is 5% of it which would be 5.5

now percentage increase=(New-old)*100/old %

(5.5-4)*100/4=>1.5*100/4 this will be equal to 37.5% which is option A

---

% increase = ( final - initial / initial ) * 100 which comes out to be 0.375 * 100 = 37.5

Answer 1

Fiscal deficit in 2015 $ = 4\%$ of GDP in 2015

Fiscal deficit in 2016 $ = 5\%$ of GDP in 2016

GDP in 2016 $= 1.1 \times $ GDP in 2015

So, Fiscal deficit in 2016 $ = 5\%$ of $1.1 \times$ GDP in 2015 $=5.5\%$ of GDP in 2015.

So, Fiscal deficit increased from $4\%$ to $5.5\%$ of the GDP in 2015.
Percentage increase $ = \dfrac{5.5-4}{4} \times 100\%= \dfrac{300}{8}\% = 37.5\%$

Comments

@Arjun sir can you please explain why in 3^rd line we taken 

gdp of 2016 = 1.1 * gdp of 2015

---

@Ray Tomlinson 

the GDP increased by 10% from 2015 to 2016...

because of this line. 

Answer 2

   @chatgpt

Answer 3

Answer: 37.5 a

Let us consider GDP for 2015 be x then for 2016 an increase in 10% gives 1.1x.

Given fiscal deficit for 2015 is 4% which is 0.04x
fiscal deficit for 2016 is 5% which is 0.05*1.1x=0.055x.

%increase = 0.055x-0.04x/0.4x = 0.375.