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Definition of low-budget adjective in Oxford Advanced Learner's Dictionary. Meaning, pronunciation, picture, example sentences, grammar, usage notes, synonyms and more.
- Overview
- Summary
- Deficits occur when government spending and transfer payments exceed tax revenues
- When a government borrows money, its debt increases
- Government debt reduces the ability of a government to spend in the future
- There is a close relationship between the budget balance and the business cycle
- Key equations
- Common misperceptions
- Questions for review
In this lesson summary review and remind yourself of the key terms and graphs related to deficits and debts.
Summary
We've learned that expansionary fiscal policy, such as decreasing taxes or increasing government spending, can be a powerful tool to fix a recession. But just like you, if a government’s spending exceeds its income, it has to borrow the difference.
When a government's expenditures on goods, services, or transfer payments exceed their tax revenue, the government has run a budget deficit. Governments borrow money to pay for budget deficits, and whenever a government borrows money, this adds to its national debt.
Key terms
Key takeaways
We've learned that expansionary fiscal policy, such as decreasing taxes or increasing government spending, can be a powerful tool to fix a recession. But just like you, if a government’s spending exceeds its income, it has to borrow the difference.
When a government's expenditures on goods, services, or transfer payments exceed their tax revenue, the government has run a budget deficit. Governments borrow money to pay for budget deficits, and whenever a government borrows money, this adds to its national debt.
If a person finds that they are spending more money than they have, they will either need to sell off some of their belongings or borrow money. The government faces the same problem. The money that the government has to spend is the money it collects in the form of taxes; if that isn't enough to cover its spending, the government has run a deficit and will have to borrow money.
What does the government spend money on? Governments spend money on goods and services, such as computers for government employees and payments to government contractors. Additionally, governments frequently have legal obligations to make payments to individuals, such as social security retirement payments in the United States.
Whenever a government runs a budget deficit, it adds to its long-term debt. For example, suppose the government of Kashyyyk has a $200 million budget deficit one year, so it borrows money to pay for its budget deficit. The next year the government runs another deficit, this time of $100 million. Now the government has accumulated a debt of at l...
Notice that we said that the government has accumulated a debt of at least $300 million in the last example. If you are asking yourself, "but doesn't $200 million plus $100 million equal $300 million exactly?", then you are forgetting an important aspect of debt: interest.
Just like anyone else borrowing money, governments have to pay back both the amount of a loan and interest on that amount. For example, if Kashyyyk's loans accrue 10% interest each year, then at the end of the first year it now owes:
Debt at the end of the year=Amount of loan+amount of interest=$200 million×($200 million×10%)=$200 million×$20 million=$220 million
So, if the government doesn't pay down any part of the amount borrowed in the first year or the interest, the total accumulated debt when it runs a deficit the second year is $320 million.
Debts must be repaid. That means that if the government of Kashyyyk wants to repay that debt, it will have to stop running deficits and start running surpluses. A government will have to begin to reallocate spending away from goods, services, or transfer payments and toward paying down its debt.
[Can't a government just print money to pay for spending or pay off debt?]
Governments tend to run deficits during recessions and surpluses during expansions. Recall that automatic stabilizers tend to kick in when there are changes in output, which means that during recessions, government spending on things like transfer payments tends to increase at the same time that tax revenues decrease.
Public savings is calculated as:
Savings by government=Tax revenue−Government spending−Transfer payments
For example, if a country takes in $700 in tax revenue, spends $600 on goods and services and $200 in transfer payments:
Savings by government=Tax revenue−Government spending−Transfer payments=$700−$600−$200=−$100
•New learners sometimes get the terms "deficit" and "debt" confused. Deficit describes a one-time shortage (for example, in an annual budget), while debt describes a shortage that has accumulated over time, e.g. from multiple annual deficits
•Many people assume that deficits are "bad," but an economist would remind those people that we tend to stick to positive analysis rather than normative analysis. A deficit might be the result of an event such as a recession which gets paid off the next time an economy experiences a boom (and a budget surplus as a result of that boom). However, running many deficits leads to debt, and debts must be repaid. That means that eventually paying a debt will limit what a government can spend in the future.
•Suppose a government has a deficit in 2016 of $100 million and there is $600 million in national debt that it accrued before 2016. If the interest paid on debt is 10% , how much of a budget surplus will be necessary for 2017 to keep the debt from getting any larger? SHOW YOUR WORK.
[I've tried it myself, shown all of my work, and double checked my math, can I compare my answer to the correct one?]
•If a government has a budget deficit, what are its options to return to a balanced budget?
[Solution, please]
Produced or conceived without spending very much.... Click for English pronunciations, examples sentences, video.
1. Having or requiring only a small budget; cheap (literal and…. 2. spec. Designating a film, television production, etc., that…. 1. 1918–. Having or requiring only a small budget; cheap (literal and figurative). 1918. The actual figures show that 99 low budget girls spent a total of $2207.27 for clothing, as compared with $6603.20 by 143 ...
tax money that could be collected but isn't. trigger. money put into something that can only be spent on something. trust fund. a government fund administered separately from other funds and used for a specified purpose. Study with Quizlet and memorize flashcards containing terms like non- discretionary, budget year, Capital Budget and more.
Low-budget definition: made or done on a small or reduced budget; costing relatively little money. See examples of LOW-BUDGET used in a sentence.
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The meaning of LOW-BUDGET is involving a small amount of money : involving a relatively small cost. How to use low-budget in a sentence.
