gcse economics - tools of the trade: budget surpluses and deficits
BUDGET SURPLUS
This happens if the Government collects more money in through taxation than
it spends on services
e.g.
TAXATION COLLECTED = £400 billion
GOVERNMENT SPENDING = £390 billion
BUDGET SURPLUS is £10 billion.
HOW DOES A BUDGET SURPLUS HAPPEN?
• Government may have cut back on its spending
•
Government may have raised taxes to collect more money
•
There may be a boom. In this case more people will be working, spending and
paying taxes (income, VAT, NI), at the same time the Government will have
to spend less on benefits.
WHAT TO DO WITH A BUDGET SURPLUS?
• Pay off some of the Government debt. The Government owes billions
of £. They have to pay £20 billion a year in interest alone !!!!!
•
Use the money to fund extra spending e.g. health, schools, roads
•
Save the money in case it is needed for an emergency in the future e.g. war,
health crisis
BUDGET DEFICIT
This happens if the Government spends more money than it collects in through
taxation.
e.g.
TAXATION COLLECTED = £400 billion
GOVERNMENT SPENDING = £410 billion
BUDGET DEFICIT =£10
HOW DOES A BUDGET DEFICIT HAPPEN?
• Government may have spent more money on projects.
•
Government may have cut taxes and lost some revenue.
•
There may be a recession. In this case fewer people will be working and paying
tax, at the same time the Government will have to spend more on benefits.
These GCSE Economics revision notes have been kindly provided by Peter Davies of Mill Hill School, Ripley Keep Up-todate with your GCSE Economics - Subscribe Free to Economics in the News by Email
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