The relationship between the budget balance and the national debt
Each year the government either spends more than it collects in tax (a budget deficit) or less (a budget surplus). Every deficit adds to the national debt — the total amount the government owes in total.
Formula
National Debt = Sum of all previous Budget Deficits − Surpluses
Real World
The UK ran consecutive budget deficits after the 2008 financial crisis, pushing national debt from around 40% of GDP in 2008 to nearly 100% by 2024 — a direct result of annual shortfalls accumulating over 15 years.
Exam Focus
Distinguish clearly: deficit is a flow (annual), debt is a stock (accumulated) — confusing them is one of the most penalised errors at A-level.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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