Fiscal deficits & the national debt

Explain factors that may lead to an increase in a country’s national debt as a percentage of GDP.

Evaluate the view that increasing taxation is the best way to reduce a budget deficit.

Extract C (line 13) states: ‘High economic growth rates allowed Ireland to run a budget surplus in 2018 and 2019.’

With the help of a diagram, explain how high economic growth could help to create a budget surplus.

Figure 9 shows the government budget balance for an economy from 2019 to 2023.

All other things being equal, between 2019 and 2023, the national debt of this economy increased by

Turn over for Section B

After considering Extract D, and the original evidence in Extracts A, B and C, would you recommend that the government of Sri Lanka cut its spending to reduce its debt?

Justify your recommendation.

Explain how the data in Extract A (Figures 1 and 2) show that in 2012 Greece was more likely to have a problem with its national debt than the UK.

Extract C (lines 17–18) states: ‘Some argue that the UK should increase taxes rather than add to the national debt.’

Using the data in the extracts and your knowledge of economics, evaluate the view that an increase in a country’s national debt is damaging for its economy.

At the end of the previous financial year, a country had a national debt of £20 000 billion. The government’s planned expenditure for the current year exceeds its projected income by £100 billion.

All other things being equal, which one of the following is most likely to enable the government to complete its planned expenditure and reduce the national debt?

Increasing its

Explain the possible causes of a falling budget deficit.

To what extent do you agree that reducing the budget deficit is more important to the UK’s macroeconomic performance than reducing the current account deficit on its balance of payments? Justify your answer.

All other things being equal, which one of the following is most likely to increase the

Extract E (lines 11–12) states ‘If growth could be increased, the budget deficit would fall much faster.’

With the help of a diagram, explain why a higher rate of economic growth is likely to reduce the budget deficit.

Extract F (line 1) states ‘In most of the UK, reducing the budget deficit has focused on austerity rather than tax rises.’

Using the data in the extracts and your knowledge of economics, evaluate the view that there is a strong case for significant increases in UK income tax rates.

Evaluate whether achieving a budget surplus is a desirable objective of economic policy.

At the start of the financial year, an economy’s national debt stands at £1000 billion. Over the course of the year, the government plans to spend an extra £100 billion and borrow an extra £40 billion.

If the government achieves its spending and borrowing targets, by the end of the financial year the national debt will have increased by

Which one of the following is most likely to cause an increase in the structural budget

The national debt is the