Oct 27, 2003

The U.K. government is running a budget deficit.

Sites to Visit for More Information:

  • HM Treasury
  • National Statistics Online
  • Resources for Economists on the Internet

    • Questions:

    1. What elements of automatic fiscal policy are leading to the budget deficit? What elements of discretionary fiscal policy are leading to the budget deficit?
    2. Give some examples of automatic stabilizers that are at work in the U.K. economy today.
    3. Do you think the budget deficit is a structural deficit or a cyclical deficit? Why?
    4. Describe the effect on the U.K. economy if the Chancellor raises taxes as suggested in the news article. Draw a graph to support your answer.
    5. How would “acceleration in economic growth” affect the budget balance? Why?

    Chapters: 24

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