Public Sector Finances Flashcards

1
Q

Define Fiscal Deficit / Budget Deficit

A

When government spending is greater than government revenue in a particular year

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2
Q

Define National Debt

A

A government’s total outstanding debt-effectively what the government still owes from the budget deficits accumulated over time

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3
Q

Define Debt-to-GDP Ratio

A

Total government debt as a ratio of GDP. This is used to judge the likelihood of government debt being repaidd. In general, the higher the ratio the less likely repayment becomes

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4
Q

What happens to the national debt when a government has a fiscal deficit

A

Size of the national debt will get larger

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5
Q

What happens to the national debt when a government has a fiscal surplus

A

The size of the national debt will get smaller

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6
Q

What is Cyclical Budget/Fiscal Deficit

A

Part of a budget deficit that occurs due to automatic stabilisers

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7
Q

When does automatic stabilisers cause the cyclical budget deficit to fall

A

From recovery to the peak of a business cycle

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8
Q

When does automatic stabilisers cause the cyclical budget deficit to rise

A

From a peak to the trough of a business cycle

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9
Q

Define Structural Budget/Fiscal Deficit

A

Part of a budget deficit that occurs due to discretionary fiscal policy rather than automatic stabilisers

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10
Q

Factors Influencing the Size of the Deficit

A

State of the Economy

Age Distribution of the Population - Dependency Ratio

Discretionary Fiscal Policy

Debt Interest

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11
Q

Impact of Fiscal Deficits and National Debt

A

Interest Rates can rise

Debt servicing is dependent on interest rates

Intergenerational Equity worsens as the next generation has to pay for it

Rate of Inflation worsens

Credit Rating is likely to fall

FDI is likely to fall

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12
Q

Areas of government spending that are likely to boost long term economic growth

A

Infrastructure, Education and Health

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13
Q

Areas of government spending that are likely to have a negative or negligible impact on economic growth

A

War and Vanity project

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14
Q

Define Creditworthiness

A

A measure of how likely an individual, firm or government will repay, or default, on a debt

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15
Q

What is a credit rating

A

An assessment of the creditworthiness of the borrower such as a company or government

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