Explain the following terms:
- National Debt - Leaving Cert Economics - Question 7(a) - 2017
Question 7(a)
Explain the following terms:
- National Debt.
- Fiscal Policy.
- Budget Deficit.
- Tax Avoidance.
Worked Solution & Example Answer:Explain the following terms:
- National Debt - Leaving Cert Economics - Question 7(a) - 2017
Step 1
National Debt
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Answer
National debt refers to the total outstanding debt or borrowing owed by the government. It is an accumulation of annual budget deficits, where the government borrows funds to cover shortfalls between expenditure and revenue.
Step 2
Fiscal Policy
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Answer
Fiscal policy involves changes in government spending and taxation that aim to influence overall spending in the economy. By adjusting spending levels and tax rates, the government can affect economic growth and stabilize economic fluctuations. This policy dictates the timing, magnitude, and structure of current revenue and expenditure.
Step 3
Budget Deficit
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Answer
A budget deficit occurs when total government expenditure exceeds its total revenue. This situation means that the government is spending more money than it is bringing in, often leading to increased borrowing and a rise in national debt.
Step 4
Tax Avoidance
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Tax avoidance is the strategic arranging of one’s affairs within the law to minimize or avoid tax liabilities. Unlike tax evasion, which is illegal, tax avoidance utilizes legal methods to reduce taxable income or gain deductions.
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