Chapter 14 Outline
A. Definitions and General Comments
1. A budget deficit occurs when government expenditures exceed government revenue over some relevant time span.
2. A budget surplus occurs when government revenue exceeds government expenditures over some relevant time span.
3. Economists discuss two types of deficits: the structural deficit and the actual deficit.
a. The structural deficit is the deficit that would occur if the economy were operating at full employment.
b. The actual deficit is the difference between the government's actual revenue and expenditures.
4. Economists are more concerned with the structural deficit.
a. The automatic increases in government expenditures and decreases in government revenue that occurs when the economy enters a recession play a positive role in stabilizing the economy.
b. The structural deficit will remain even after the economy returns to full employment.
Return to Textbook Materials Page