Economics Question Help?

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crashcody
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#1
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#1
Hey, I found a past paper question -

A government takes decisions to target a budget surplus, this is an example of:

a) Contractionary monetary policy
b) Discretionary fiscal policy
c) Expansionary fiscal policy
d) Expansionary monetary policy

Immediately, I eliminated monetary policy (so not A or D), leaving B or C. From the phrasing of the question, I am lead to believe that it means REDUCING/REMOVING a budget surplus. Hence I put C (less tax, more spending = lower surplus/deficit). However, mark scheme says B - Why?
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BlueChicken
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#2
Report 6 months ago
#2
(Original post by crashcody)
Hey, I found a past paper question -

A government takes decisions to target a budget surplus, this is an example of:

a) Contractionary monetary policy
b) Discretionary fiscal policy
c) Expansionary fiscal policy
d) Expansionary monetary policy

Immediately, I eliminated monetary policy (so not A or D), leaving B or C. From the phrasing of the question, I am lead to believe that it means REDUCING/REMOVING a budget surplus. Hence I put C (less tax, more spending = lower surplus/deficit). However, mark scheme says B - Why?
I would read it as "to target a budget surplus" means that the aim is a budget surplus.
Last edited by BlueChicken; 6 months ago
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crashcody
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#3
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(Original post by BlueChicken)
I would read it as "to target a budget surplus" means that the aim is a budget surplus.
Ok, that makes sense, thank you. I think I am used to it being the other way round (etc 'Target a budget deficit' would refer to removing one'), oops : )
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BlueChicken
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(Original post by crashcody)
Ok, that makes sense, thank you. I think I am used to it being the other way round (etc 'Target a budget deficit' would refer to removing one'), oops : )
yes, it's not really the best wording. It would be helpful if it said " the government is aiming for a budget surplus. What is the best policy to achieve this?" or something like that. Good luck with it!
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