Debts
What is a debt, and how do you calculate it?
Debt is money owed by one party to another plus interest. Debt is also the accumulation of deficits over a long period of time.
Formula: sum of past deficits - sum of past surpluses
What is a deficit, and how do you calculate it?
When the government, a company, or an individual spends more than what they earn in a given time period (usually 1 year).
Formula: total revenue - total expenditure
What is a budget?
An estimation of the revenue and expenses over a future period of time.
What are 3 types of consumer debts?
Secured (mortgages), unsecured, and revolving.
How are debts and deficits related?
The government goes into debt to pay off its deficits.
What are household income and debt?
Household income: average income of all the members of a household who are 15 years old and older
Household debt: average amount of money that all members of a household (15 yrs+) owe to financial institutions
Name 3 ways to represent debt and their formulas.
1. Debt-to-GDP ratio: Debt / GDP
2. Debt-to-income ratio (DTI): Paid Monthly Debts / Gross Monthly Income
3. Debt per capita: total debt / population
How do you calculate a budget balance? [Bonus of 300 if you can give its “forms” and one area the federal government will use with its budget]
Formula: revenue - outlays
Forms: balanced, surplus, deficit
Federal government will target inflation relief, grocery rebate, improve health care, improve environmental protection, etc.
Give 3 reasons why Canada’s (household) debt is so high.
Mortgages, high inflation, high interest rates, pent-up demand/travel, higher increases in credit card spending
Name a source of revenue and expense for each level of government.
M. Expenditure: public services, TTC, funding schools/boards/public institutions
M. Revenue: property taxes and provincial grants
P. Expenditure: education, health care, highways
P. Revenue: personal income taxes, general sales taxes, natural resource revenues
F. Expenditure: transfer payments, other direct program expenses, public debt charges, net actuarial losses
F. Revenue: income tax, GST, Employment Insurance (EI) premium revenues, proceeds from the pollution pricing framework, and other revenues
What are the 3 types of government deficits? Define each of them.
Budget deficit: expenses exceed revenue
Trade deficit: value of national imports exceed value of national exports
Revenue deficit: projected net income exceeds realized net income
Why did household income lower between 2020 to 2021?
COVID-19, less government transfers because of EI benefits, poverty rate increased