Tuesday, 17 February 2009

Budget surplus

What is budget surplus?

Budget surplus is when taxation is greater than government spending

Why might government make a budget surplus?

according to AD=C+I+G+(X-M),

that I think , because the aggregate demand increase , consumption will increase, it may lead to

inflation and in order to deal with inflation, the government need make the aggregate go down,

therefor they increase the tax , the disposable income goes down, aggregate demand goes down,

and inflation decrease

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