part B 8. Answer the following questions on fiscal policy:(a) According to data from the Office of National Statistics, in January 2022 the UKpublic sector spent less than it received in taxes resulting in a primary surplus.Considering that the UK government was previously running a deficit, and assumingthat UK GDP growth is higher than the real interest rate paid on the debt, use aphase line to show how the surplus may affect debt accumulation in the UK.(b) In the Financial Times article "UK public finances vulnerable to higher inflation, saysSunak" (2 March 2022), we read:"Rishi Sunak[*] warned that the UK economy and public finances were "vulnerable"to higher inflation and interest rates in comments ahead of the spring statementsuggesting that tough decisions could be required in the months ahead.""The [Treasury] committee expressed concern that the government hadcontributed to the UK's high rate of inflation which hit by 5.5 per cent in Januaryand is expected to top 7 per cent by April. It said Sunak's decision to increaseNational Insurance to bolster the health and social care sector had contributed tothese inflationary pressures by fuelling high pay claims and encouraging companiesto protect margins by raising prices."[*] Note: Rishi Sunak is the UK's Chancellor of the Exchequer, also known as Finance Minister inother countries.Explain why Sunak said that public finances are vulnerable to higher inflation, andwhy the announced increase in taxation (increase in national insurance) may havecontributed to the inflationary pressure? Is Sunak's announced policy acontradiction to his statement?

(a) According to data from the Office of National Statistics, in January 2022 the UK public sector spent less than it received in taxes resulting in a primary surplus. Considering that the UK government was previously running a deficit, and assuming that UK GDP growth is higher than the real interest rate paid on the debt, use a phase line to show how the surplus may affect debt accumulation in the UK.

(a) According to data from the Office of National Statistics, in January 2022 the UK public sector spent less than it received in taxes resulting in a primary surplus. Considering that the UK government was previously running a deficit, and assuming that UK GDP growth is higher than the real interest rate paid on the debt, use a phase line to show how the surplus may affect debt accumulation in the UK.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 9SCQ: True or False: Federal spending has grown substantially in recent decades. By world standards, the...

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