Budget Surplus
A budget surplus occurs when a government's income exceeds its expenditures during a specific period. This results in a positive balance, allowing the government to pay off debt, invest in infrastructure, or save for future expenses. A budget surplus is generally seen as a positive economic indicator, reflecting fiscal responsibility and the potential for economic stability.
3 Key excerpts on "Budget Surplus"
eBook - ePub- Anthony J. Makin(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...A primary surplus less than one per cent would see public debt increase, whereas a primary surplus greater than one per cent would see the public debt to GDP ratio fall. This abstracts from the notion of ‘seigniorage’, which occurs when budget deficits are money financed by central banks. Seigniorage effectively provides an additional source of ‘revenue’ to national governments and, if limited, is not necessarily inflationary if increased real money demand associated with buoyant economic growth matches the money supply expansion due to money financing of the budget deficit. KEY POINTS 1. This chapter explains key aspects of the government budget and fiscal policy. 2. Fiscal policy changes public spending and revenue raising, as recorded in the budget to influence aggregate expenditure and the external imbalance. 3. To ascertain the fiscal stance, it is necessary to go beyond the official measures of the overall budget deficit or surplus, the difference between revenue and public spending, to account for the effects of macroeconomic activity and inflation. 4. Pure debt financing of budget deficits entails borrowing from residents and foreigners...
eBook - ePubContemporary Economics
An Applications Approach
- Robert Carbaugh(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...Conversely, counteracting inflation means decreasing government spending or increasing taxes, resulting in a Budget Surplus. From the viewpoint of economic stabilization, budget deficits and surpluses are a common feature of fiscal policy. The federal deficit (surplus) is the difference between total federal spending and revenue in a given year, as seen in Figure 13.3. To cover this gap, the government borrows from the public. Each yearly deficit adds to the amount of debt held by the public. Referring to the figure, we see that the federal government’s budget has generally been in deficit. Also, the term federal debt represents the cumulative amount of outstanding borrowing from the public over the nation’s history. It has been rising because of the persistent federal deficits that have occurred on an annual basis. Figure 13.3 Deficits and Surpluses of the U.S. Government under Various Presidents, 1981–2011 Source: Economic Report of the President, 2012, Table B–81. Table 13.4 Federal Debt Held by the Public Year Federal Debt Federal Debt as a Percent of GDP 1940 $43 44 1945 236 106 1955 227 57 1965 261 38 1975 395 25 1985 1,500 36 1995 3,603 49 2005 4,592 37 2014 12,780 73 Source: Economic Report of the President, 2015. The main measure of the U.S. federal debt is the debt held by the public. This is the measure most commonly used because it reflects how much of the nation’s wealth is absorbed by the federal government to finance its obligations and, thus, best represents the current impact of past federal borrowing on the economy. As seen in Table 13.4, the federal debt held by the public was $12,780 billion in 2014. In contrast, the federal debt was only $43 billion in 1940. The amount of a borrower’s debt by itself is not a particularly good indicator of the debt’s burden. If size were the only thing that mattered, a wealthy individual with a large mortgage would be judged to have a greater debt burden than a person of modest means with a smaller mortgage...
eBook - ePub- Rob Dransfield(Author)
- 2013(Publication Date)
- Routledge(Publisher)
...At one level this involves the relationship between total public spending and total public revenues. For example, a deficit budget can pump extra spending into the economy whereas a Budget Surplus would withdraw spending from the economy. Fiscal policy also involves adjusting different types of tax and spending in order to target specific objectives. For example, the government may shift the emphasis from direct to indirect taxes or from regressive to progressive taxes. Keynesian economists believe that fiscal policies can be used by the government to stimulate the economy. In contrast neoclassical and monetarist economists believe that there should be a balanced budget. Key Ideas Fiscal policy Fiscal policy is government policy designed to use its own spending and the taxes that it raises in order to achieve desired policy objectives such as full employment or economic growth. Whereas monetarists seek to balance government revenues and taxes, Keynesian economists believe that fiscal stimulus can be used to support economic growth and to counteract unemployment. The balance between government spending and taxes is made up by government borrowing (or paying back debt). Government expenditure The main area of government expenditure is on welfare, including health, education and social benefits. Government expenditure is one of the main ingredients of GDP. Free market supporters believe in rolling back the size of the government in the economy. Government spending includes central and local government spending. Government taxes Progressive taxes take a greater percentage of income from the rich than the poor. Regressive taxes take the greatest proportion from the poor. Direct taxes are deducted directly from a taxpayer’s income at source...
