Macroeconomics

Table of Contents

1. Topic pack - Macroeconomics - introduction
2. 2.1 The level of overall economic activity (notes)
3. 2.1 The level of overall economic activity (questions)
4. Section 2.2 Aggregate demand and supply (notes)
5. Section 2.2 Aggregate demand and supply (simulations and activities)
6. 2.2 Aggregate Demand and Aggregate Supply (questions)
7. 2.3 Macroeconomic objectives (notes)
8. Low Unemployment
9. 2.3 Macroeconomic objectives (questions)
10. 2.4 Fiscal policy (notes)
    1. Fiscal policy - introduction
    2. The government budget
    3. Types of government expenditure
    4. A Case study: Government spending in the UK
    5. The budget outcome
    6. Fiscal policy and short-term demand management
    7. Impact of automatic stabilisers
    8. Fiscal policy and its impact on potential output
    9. Evaluation of fiscal policy
    10. The multiplier effect & fiscal policy
    11. Accelerator
    12. Crowding out
11. 2.4 Fiscal policy (questions)
12. 2.5 Monetary policy (notes)
13. 2.5 Monetary Policy (questions)
14. Section 2.6 Supply-side policies (notes)
15. 2.6 Supply-side policies (questions)
16. Print View

The budget outcome

Syllabus: Distinguish between a budget deficit, a budget surplus and a balanced budget.

• Budget deficit exists where government income from taxation is less than government spending: R<T

• Budget surplus exists where government income from taxation exceeds government spending: R>T

• Balanced budget exists where government income from taxation equals government spending: R=T

• Fiscal stance refers to the position the government is taking with regard to operating a budget deficit, budget surplus or a balanced budget. Whilst you may think that it would be common sense for a government to always run a budget surplus or a balanced budget, there may be very good reasons for it to deliberately choose to operate a budget deficit (Keynesian expansionary policy)

Syllabus: Explain the relationship between budget deficits/ surpluses and the public (government) debt.

• National debt refers to the total amount that the government has borrowed over time as a consequence of operating budget deficits.

This is a great site to show you the extent of the USA National Debt Watch it increasing by the second.

How much is Brazil's national debt?

Clearly, if there is a budget deficit the national debt is increased by that amount (because extra spending must be financed by borrowing if it does not come from tax revenue).

A budget surplus reduces the national debt

• Public sector borrowing requirement (PSBR) is where total government income (tax revenue and income from public corporations) is less that government spending. It is largely made up of the budget deficit. In such cases, the government has to borrow money to finance the short fall. It can do this by selling national savings certificates and securities such as gilts or treasury bills and bonds.
• Public sector debt repayment is where total government income (tax revenue and income from public corporations) is greater than total government spending. In such cases, the government can repay some its previously accumulated national debt.