Series 52: 7.5.2. Effects Of Spending

7.5.2. Effects of Spending

When a government’s spending equals its revenues, it has balanced its budget. When government revenue exceeds government expenditures, it is called a budget surplus. A surplus is often used to pay down debt, save for the future, or increase programs that benefit the public. Budget surpluses typically lead to lower interest rates because a country, and hence its sovereign debt, receives a better credit rating.

When a government spends more than it brings in through taxes, a budget deficit is created. The government