EC140 Lecture 31: Chapter 31
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EC140 Full Course Notes
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Document Summary
Government debt is the total stock of financial liabilities for the government. A budget surplus or deficit is the difference between current revenue and current expenditure. Debt is a level, deficits, and surpluses are the change in the debt. Expenditures must b paid from net tax revenue or borrowing. Expenditure include spending and interest on the debt: g + i * d = t + borrowing. The budget deficit is: d = g + i *d -t. Governments don"t have direct control over debt service. Primary budget deficit ignores debt service: primary budget deficit = g t. Federal debt is roughly 30% of gdp. Provincial governments in canada also carry significant debt. Debt varies across provinces but is getting close to federal debt levels. Provincial debts likely to continue to rise. Not all changes in deficits are policy decisions. Higher national income implies: higher tax revenue, lower transfer payments. Government spending and debt service can be viewed as autonomous.
