A2 Economics Revision - Data Description Revision on Fiscal Deficits

Here is another example of some macro-economic data that you might be asked to interpret in an A2 AQA data response exam paper

“Using the extract, identify two significant features of the changes in the fiscal balance for the USA and the UK over the period shown by the data” (5 marks)

Note first that the data is for the government fiscal balance (i.e. a surplus or deficit) expressed as a percentage of national income (GDP). And also that one of the years contains a forecast from the OECD.

1/ In only one of the years did the USA and the UK run a budget surplus. In 2000, the UK ran a surplus of tax revenue over spending of nearly 4% whereas the United States had a surplus of just under 2% of GDP. Thereafter each country has operated with a budget deficit.

2/ For most of this period, the scale of the annual budget deficits has been getting larger. For example from 2006 onwards the United States saw the annual fiscal deficit widen from 2% in 2006 to 11% of GDP in 2009. The UK’s fiscal position appears even worse with a deficit in excess of 12% of GDP in both 2009 and 2010.

3/ The overall budget position for the UK and the USA appears to move closely together - perhaps reflecting similar timing and volatility in their economic cycles. Whereas in the early years of the period, the UK budget deficit was around 2% smaller, this has reversed during the recent recession.