Page 102 - Macroeconomics. book docx_Neat

Occurs when government revenues exceed expenditures.

Surplus = Revenue − Expenditure

7. Government Budget and Macroeconomic Problems

Government budget policy is used to solve macroeconomic problems:

- During recession: government may run a deficit to stimulate demand.
- During inflation: government may reduce spending or increase taxes.

- To reduce unemployment: government increases public investment.

- To reduce inequality: government uses taxes and social spending.

8. Simple Numerical Examples

Example 1:

Budget Deficit

If government spending = 500

Government revenue = 400

Deficit = 500 − 400 = 100

Example 2:

Budget Surplus

If government revenue = 600

Government spending = 550

Surplus = 600 − 550 = 50

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