Read the two statements and choose the correct option.

I. The primary deficit can be negative while the fiscal deficit is positive.

II. The primary deficit is always larger than the fiscal deficit.

Explanation

1. 01

   If interest payments exceed the fiscal deficit, PD = FD − interest is below zero (a primary surplus). I is true.

2. 02

   PD = FD − interest, so it is smaller whenever interest is paid. II is false.