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    Hey, I was wondering if anyone could help me define government account deficit? what is the difference between current account deficit and government account deficit? Also, with reference to the UK, what policies could the government and bank of England implement in order to reduce government deficit and government account deficit?
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    (Original post by Mary2222)
    Hey, I was wondering if anyone could help me define government account deficit? what is the difference between current account deficit and government account deficit? Also, with reference to the UK, what policies could the government and bank of England implement in order to reduce government deficit and government account deficit?
    I'm not sure what you mean, from my understanding there's a Balance of Trade deficit on current accounts, and a Budget deficit.

    Balance of trade deficit on current account refers to a situation whereby the value of imports is greater than the value of exports.

    Whereas the Budget deficit refers to Fiscal policy measures whereby Government spending outweighs tax revenue.

    To reduce government deficit (in which I assume you mean budget), the government can establish contractionary Fiscal policies. This aims to increase tax rates (be it direct for instance; Income, corporation tax or Indirect e.g V.A.T) and decrease government spending by cutting spending on things such as Healthcare, education and other government funded projects.

    The bank of England could similarly increase interest rates deterring people from borrowing money and limiting the amount of Imports the UK consume. Cetarus Parabus, UK exports will be higher than Imports and this is a component of AD and it would lead to a Current account surplus.
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    (Original post by Abdul-Karim)
    I'm not sure what you mean, from my understanding there's a Balance of Trade deficit on current accounts, and a Budget deficit.

    Balance of trade deficit on current account refers to a situation whereby the value of imports is greater than the value of exports.

    Whereas the Budget deficit refers to Fiscal policy measures whereby Government spending outweighs tax revenue.

    To reduce government deficit (in which I assume you mean budget), the government can establish contractionary Fiscal policies. This aims to increase tax rates (be it direct for instance; Income, corporation tax or Indirect e.g V.A.T) and decrease government spending by cutting spending on things such as Healthcare, education and other government funded projects.

    The bank of England could similarly increase interest rates deterring people from borrowing money and limiting the amount of Imports the UK consume. Cetarus Parabus, UK exports will be higher than Imports and this is a component of AD and it would lead to a Current account surplus.
    Thank you! Isnt a Balance of Trade deficit on current accounts the same as a current account deficit though?
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    (Original post by Mary2222)
    Thank you! Isnt a Balance of Trade deficit on current accounts the same as a current account deficit though?
    Yup, exactly the same thing.
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    You may be a bit confused. Two types of deficit exist in AS Economics.

    Budget deficit = Government spending > tax receipts

    Balance of trade deficit = import > exports
 
 
 
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