Public sector finances 4.5.3 Flashcards
1
Q
Define Budget Deficit
A
when public expenditure is greater or more than tax revenue
2
Q
What are the 2 types of budget deficit
A
Cyclical deficit
Structural deficit
3
Q
Define Cyclical deficit
A
When public expenditure increases and tax revenue decreases during a recession
4
Q
Define Structural deficit
A
Budget deficits that remain at any stage of the business cycle
5
Q
Define National debt
A
Total debt built up by government borrowing over time
6
Q
How do budget deficits and national debts impact interest rates
A
Gov needs to borrow to fund PE, Increases demand for money, Increases interest rates
7
Q
How do budget deficits and national debts impact financial crowding out
A
Budget deficits increase interest rates, so firms are less willing to take loans out
