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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 the abandonment of the 2019 budget surplus target is a fall in UK economic growth. When the economy experiences decreased growth, the government may require additional support to stabilize the economy, leading to a need for prolonged fiscal policies. Additionally, reduced business confidence can discourage private sector investment, prompting the government to intervene by possibly increasing public expenditure to stimulate growth.
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. The government would continue to run a budget deficit, meaning that public expenditure exceeds tax revenue. Consequently, the government will need to finance the budget deficit by borrowing money, adding to the national debt.
Step 3