Thirdly it helps fight inflation, on occasion, the economy can ‘heat up’; causing high levels of

inflation. During periods of high economic growth, we may see strong price increases. Although
inflationary pressures can also occur during periods of economic decline. Essentially, inflation is
caused by a growth in the money supply. With that said, a budget surplus will take money out
of the economy, thereby reducing the money supply, and creating a deflationary environment.

Lastly, it implies reduced government debt. When a government has a budget surplus, it can do
many things with the excess cash that it accumulates. Usually, this will be used to reduce
existing debt that accumulated during periods of a budget deficit. This helps the nation reduce
its debt burden and increase its global standing as a reliable debtor. So when the nation needs
cash in the future, it can easily obtain capital as investors trust in its ability to pay it back.

References
Boyce, P. (2020, October 27). Retrieved from BOYCEWIRE: http://www.boycewire.com/budget-surplus-
defination/

Corporate finance institute. (n.d.). Retrieved from http://www.corporatefinanceinstitute.com

Pettinger, T. (2017, June 13). effects of budget surplus. Retrieved from economics help:
http://www.economicshelporg/blog/14011/debt/effects-of-a-budget-surplu/