Question

Describe how budget surplus can have both positive and negative impact on the economy.

Answer 1

budget surplus is defined when the government revenues exceed the government expenditure.

postive effects:-

1) this means that government have more reserves. hence, they can invest anywhere where they want in order to increase economic growth.

2) having budget surplus means the government has more chances to invest for future growth.

3) a budget surplus shows the strong fiscal discipline.

negative effects.

1) greater revenues and less expenditure may also means government is charging high taxes. which leads to discouragement to private investment.

2) less government expenditure means less government purchases .hence, there is less of GDP and National income.

3) More revenue and less expemditure depicts less economic growth many times.