Budget Surplus (1 Viewer)

[george191919]

Hi guys,

Is the main reason why the government wants to run a surplus to close the inflationary gap or are there other reasons?

Thanks a lot

 

[Bobbo1]

lower devt servicing costs, increase in foreign investor confidence

 

[sakatahahaha]

lower devt servicing costs, increase in foreign investor confidence

Expanding on that idea...

The main issue is external stability. In the past the government used macroeconomic policies to target the CAD + to improve foreign debt. Now the main aim of the government after that guy whats his name that 'pitchford thesis" was introduced is to maintain a BALANCED BUDGET so that the government would not borrow capital from private business for expansionary policies... Therefor you can say the government maintains a balanced budget in order to not force firms to borrow from oversease where the interest rates may be higher which will inturn lead to higher CAD and foreign debt bla bla..

 

[george191919]

Thanks heaps guys. Looks like I'll have to update my essay