Unit 2: Government Finances (Fiscal Deficit)

AS Macro Key Term: Fiscal Deficit


The fiscal deficit (or the budget deficit) is the amount by which government spending on state provided goods & services, transfers and capital spending exceeds income from taxation.
 
A fiscal deficit must be financed usually by the issue of new government debt. Data for the UK’s fiscal deficit is shown in the following charts. The UK Coalition government has set an ambitious (and controversial) target to eliminate the structural element of the fiscal deficit over the course of the next four years.


The first chart below tracks UK government borrowing as a share of GDP



Some countries continue to run fiscal surpluses even despite the global economic downturn of 2008-09 - a good example is Norway.




In contrast to Greece!