Economics – Government and the macroeconomy - Fiscal policy | e-Consult
Government and the macroeconomy - Fiscal policy (1 questions)
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Factors that might lead to a government running a budget surplus include:
- Strong Economic Growth: Economic growth typically leads to higher tax revenues (from income tax, corporation tax, etc.).
- Effective Fiscal Policy: The government may implement policies to increase tax revenue or reduce spending, leading to a surplus. This could involve measures to combat tax avoidance or improve tax collection efficiency.
- Reduced Government Spending: The government may choose to reduce spending on certain programs or services.
- Increased Revenue from Asset Sales: The government might generate revenue by selling state-owned assets.
Two specific examples of government spending that might contribute to a budget deficit are:
- Increased Healthcare Spending: Rising costs of healthcare (due to an aging population or advances in medical technology) can lead to increased government expenditure.
- Social Welfare Programs: Expanding social welfare programs (e.g., unemployment benefits, pensions) can significantly increase government spending.