question archive In the late 1990s, the federal Minister of Finance (Canada) announced that expenditures would rise, yet he still predicted that the budget surplus would increase
In the late 1990s, the federal Minister of Finance (Canada) announced that expenditures would rise, yet he still predicted that the budget surplus would increase
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In the late 1990s, the federal Minister of Finance (Canada) announced that expenditures would rise, yet he still predicted that the budget surplus would increase. How is it possible that in the face of rising expenditures, the budget surplus may increase? Under which conditions might this happen, and what is the likelihood that rising expenditures will contribute to rising deficits?
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Generally, rising government expenditures result in a diminished budget surplus or a budget deficit. The only way rising expenditures would coincide with an increasing budget surplus is if revenues are growing at a faster rate than the expenditures. This a possible, yet improbable, dynamic given the fiscal challenges faced by most contemporary governments.
