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Questions and Answers
What is a characteristic of a current budget surplus?
What is a characteristic of a current budget surplus?
Which of the following is a method to decrease current spending?
Which of the following is a method to decrease current spending?
What is a consequence of a current budget deficit?
What is a consequence of a current budget deficit?
Why might the government introduce a tax on income?
Why might the government introduce a tax on income?
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What is a potential consequence of increasing taxes?
What is a potential consequence of increasing taxes?
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Which of the following is a characteristic of a current budget deficit?
Which of the following is a characteristic of a current budget deficit?
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What is a consequence of reducing the number of public sector workers?
What is a consequence of reducing the number of public sector workers?
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Why might the government reduce its current expenditure?
Why might the government reduce its current expenditure?
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What is a potential consequence of a current budget surplus?
What is a potential consequence of a current budget surplus?
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Study Notes
Government Current Budget
- Government current revenue: continuous income collected by the government, e.g. VAT
- Government current expenditure: continuous spending by the government, e.g. social welfare
- Current budget surplus: when current revenue exceeds current expenditure
Implications of Current Budget Surplus
- Reduces government debt
- Lowers economic growth as the government withdraws more money than it injects
- Helps reduce inflation and dampen demand
- Allows for a 'rainy day fund' to be set aside
Current Budget Deficit
- Current revenue is less than current expenditure
- National debt rises, which must be paid back with interest
- Economic growth increases as the government injects more money than it withdraws
- Can cause the economy to overheat and lead to inflation
- Makes the economy more vulnerable to economic shocks with no surplus set aside
Reducing Current Budget Deficit (CBD)
Increasing Current Revenue
- Introduce new taxes, such as USC
- Increase VAT rates, e.g. from 21% to 23%
- Raise revenue through taxes, like DIRT, to encourage spending over saving
Decreasing Current Expenditure
- Cut social welfare payments
- Reduce services, e.g. closure of Gardaí stations
- Implement a recruitment ban to reduce public sector numbers
Implications of Reducing CBD
- Growth of the hidden economy
- Reduced quality of state services due to fewer workers
- Increased emigration due to high income tax
- Increased inequality
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Description
Learn about government current revenue, expenditure, and the implications of a current budget surplus, including its effects on debt, economic growth, and inflation.
