the government budget (fiscal) deficit and surplus

Question 1

what is a budget deficit?

Answer 1

when the government spends more then they actually receive

Question 2

what is a budget surplus?

Answer 2

when the government receive more than they are spending

Question 3

causes to a budget deficit

Answer 3

• economic growth is low: MPC could be low due to the fact that there’s low unemployment
• decreased consumer spending: as unemployment might be high which means lower wages and the MPC is high
• economic shocks eg: covid: it increases welfare benefits such as the Furlough scheme

Question 4

consequences of a budget deficit

Answer 4

• lack of stability: may lead to less FDI, less investment and less consumption
• slower growth, spending increases as fiscal stimulus: gov increase spending make sure productive potential does not decline
• spending on public services increase, for covid this was an increase in health spending: ensure there was not a decrease in quantity/quality of labour, also ensured education quality was not changed were possible