How do budget outcomes carry over between years? (1 Viewer)

[swagmeister]

How do budget outcomes carry over between years?

For example:

The following data represents budget outcomes for a hypothetical economy between 2011/12 and 2012/13

Budget Outcome
2011/12: $20 billion
2012/13: $15 billion

Which of the following statements explains the government policy stance as a result of the budget surplus outcomes?
(a) An expansionary fiscal stance due to increasing economic activity
(b) An expansionary fiscal stance due to decreasing economic activity
(c) a contractionary fiscal stance due to increasing economic activity
(d) a contractionary fiscal stance due to decreasing economic activity

D and A can be removed right away because fiscal is generally counter-cyclical, but is it expansionary or contractionary?

In both years there has been a surplus, suggesting to me that it must be contractionary (assuming that the surplus doesn't carry over), however the answer is B) which is expansionary. The only way you could get that would be that the surplus has decreased, meaning that net spending must have increased? but does it work like that, does it carry over?

Also in terms of the real Australian Govt Budget, does the recent reduction in the deficit mean that overall net expenditure has decreased? and where does the previous deficit come into play in the current stats, is it included as part of 'net operating balance' or something?

 

[Axio]

It is an expansionary fiscal stance because the change in the budget outcome from the first year to the second year has resulted in a decrease in the budget surplus. When looking at fiscal stance, it is the change in the deficit/surplus from year to year you are looking at. This is different from whether the budget is simply a deficit, balanced or surplus budget.

 

[ICanDoIt_23]

Hey Guys!

I recently got a question for Economic (Year 11)

The Question:
Outline the Federal Budget outcome for 2015/16. Describe the major budgetary decisions in this Budget and assess the impact of the Budget on the economic functions of the Australian Government.

I just need help on how I should Structure it?
Thanks!

(Need to memorise it, as it is a in-class assessment)