4.4.3 Budget Balance

• What does the budget balance refer to?

  Revenue minus expenditure
• A budget deficit occurs when government expenditure exceeds revenue.


  True
• A balanced budget occurs when revenue is exactly equal to expenditure
• What can a government do with a budget surplus?

  Pay down debt
• A balanced budget implies the government is saving excess income.

  False
• A budget surplus allows the government to invest in future projects
• A budget deficit often requires the government to borrow money, increasing national debt.


  True
• How does higher unemployment affect the budget balance?

  Worsens it
• Higher inflation reduces the real value of government revenue and expenditure
• A balanced budget is achieved when government revenue equals expenditure
• A balanced budget occurs when government revenue is exactly equal to its expenditure
• A budget surplus allows the government to reduce debt
• Match the key components of government revenue with their examples:

  Taxes ↔️ Income tax, corporate tax, sales tax

  Fees and charges ↔️ Government services or licenses
• Economic growth increases tax revenue and reduces welfare spending
• Higher interest rates on government bonds increase debt repayment costs

  True
• What is a potential negative consequence of a budget deficit?

  Inflation
• Selling state assets can generate revenue for the government

  True
• In 2019, Norway had a balanced budget with revenues and expenditures around 57% of GDP
• A budget surplus occurs when government revenue exceeds expenditure
• What is a balanced budget?

  Revenue equals expenditure
• A budget surplus means the government is collecting more money than it is spending.


  True
• A balanced budget occurs when revenue equals expenditure
• When does a budget surplus occur?

  Revenue exceeds expenditure
• What is the definition of a budget deficit?

  Expenditure exceeds revenue
• Economic growth improves the budget balance by increasing tax revenue and reducing welfare spending
• Higher interest rates increase the government's debt servicing costs, worsening the budget balance.


  True
• A budget deficit occurs when government expenditure exceeds revenue
• What does the budget balance refer to?

  Revenue minus expenditure
• Match the type of budget balance with its definition:

  Budget Surplus ↔️ Government revenue exceeds expenditure

  Budget Deficit ↔️ Government expenditure exceeds revenue

  Balanced Budget ↔️ Government revenue equals expenditure
• A budget surplus means the government is spending more money than it is collecting

  False
• What happens during a budget deficit?

  Expenditure exceeds revenue
• A budget deficit often requires the government to borrow money through bonds


  True
• How does unemployment affect the budget balance?

  Worsens it
• A budget surplus reduces national debt
• Match the government strategy with its goal:

  Reduce Public Spending ↔️ Decrease overall expenditure

  Increase Taxes ↔️ Boost revenue

  Debt Management ↔️ Lower interest payments

  Fiscal Consolidation ↔️ Gradually reduce deficits
• Which country had a budget deficit of over 10% of GDP in 2009?

  United Kingdom