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The UK has experienced a budget deficit since 2001 - Edexcel - A-Level Economics A - Question 4 - 2018 - Paper 2
Question 4
The UK has experienced a budget deficit since 2001. The government aimed to reach a budget surplus by 2019, but in 2016 this target was abandoned. (a) Explain one l... show full transcript
Worked Solution & Example Answer:The UK has experienced a budget deficit since 2001 - Edexcel - A-Level Economics A - Question 4 - 2018 - Paper 2
Step 1
Explain one likely reason why the 2019 budget surplus target was abandoned.
Answer
One likely reason for abandoning the 2019 budget surplus target is a fall in UK economic growth. Economic growth impacts government revenue, as lower growth can lead to decreased tax receipts due to reduced economic activity. When the economy is not performing strongly, the government may require more time and support to stabilize growth, leading to the decision to forgo the surplus target.
Step 2
Explain the likely impact of abandoning the budget surplus target on the UK national debt.
Answer
Abandoning the budget surplus target is likely to result in an increase in the national debt. When the government operates with a budget deficit, it means that expenditures exceed tax revenues. As a result, the government will have to borrow more money to finance this deficit, which contributes to the growing national debt.
Step 3