Final answer:
The government budget deficit is the excess of government expenditures over revenues in a fiscal year, while the primary deficit is the budget deficit excluding interest payments on debt. The primary deficit examines current fiscal operations, while the overall deficit includes costs from past borrowing.
Step-by-step explanation:
Understanding the concepts of government budget deficit and primary deficit is essential in analyzing economic policies and fiscal health. A government budget deficit occurs when total government expenditures exceed its revenues within a given fiscal year. On the other hand, the primary deficit reflects the government budget deficit excluding interest payments on accumulated debt.
The difference between these two is significant because the primary deficit focuses solely on current government operations and policies, without considering costs related to past borrowing. This helps in identifying whether current fiscal policies are sustainable. For instance, a nation might have a significant overall deficit due to high interest payments on existing debt, despite running a surplus before those interest expenses are accounted for.