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Define the term government budget surplus - Leaving Cert Economics - Question c - 2019
Question c
Define the term government budget surplus. Outline the possible effect of a government budget surplus on a country's national debt. Outline how measures to reduce ... show full transcript
Worked Solution & Example Answer:Define the term government budget surplus - Leaving Cert Economics - Question c - 2019
Step 1
Define the term government budget surplus.
Answer
A government budget surplus exists when total government revenue exceeds total government current expenditure. This indicates that the government has additional funds available for use, which can include paying down debt, investing in infrastructure, or funding public services.
Step 2
Outline the possible effect of a government budget surplus on a country's national debt.
Answer
National debt is the total amount of government borrowing that is outstanding. A government budget surplus means there are extra funds available for the government to pay back the national debt, which can reduce the debt burden for future generations. Additionally, a surplus reduces the need for new borrowing, thereby decreasing future interest obligations associated with the national debt.
Step 3
Outline how measures to reduce Ireland’s national debt could conflict with any two other Irish Government objectives.
Answer
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Reduced national debt vs economic growth: To lower the national debt, the government may need to reduce public spending and increase taxes, which can have a negative impact on economic growth by dampening consumer spending and investment.
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Reduced national debt vs improved infrastructure: Efforts to decrease national debt might limit government expenditure on infrastructure projects, which are necessary for long-term economic development and regional growth.