Vietnam Targets 7% GDP Growth This Year

EconEye Admin

4 years ago

Vietnam is aiming for economic growth of 7% this year compared to 2.58% last year, Nguyen Chi Dung, the country’s planning and investment minister said. Dung also reported that Vietnam’s budget was in surplus.—asia.nikkei.com

Answer the following questions to check your understanding of the story.

1) Why does Vietnam have a government budget surplus?

Vietnam has a government budget surplus because ______________.

a) the sum of personal and corporate income taxes exceed government expenditure on goods and services

b) government receipts exceed the sum of government expenditure on goods and services and debt interest

c) personal income taxes exceed transfer payments

d) government receipts exceed government outlays

Wrong! - What are the sources of the government’s tax revenues? What are the government’s expenditures? How do we use this information to calculate the government budget surplus?

Good Job! - Vietnam has a government budget surplus because the government’s receipts exceed its outlays.

2) Why does Vietnam’s government budget surplus lead to economic growth?

Vietnam’s government budget surplus ______________, which leads to economic growth.

a) decreases the demand for loanable funds, lowers the real interest rate, and decreases private investment

b) increases the supply of loanable funds, lowers the real interest rate, and increases private investment

c) decreases the supply of loanable funds, raises the real interest rate, and increases private saving

d) increases the supply of loanable funds, lowers the real interest rate, and decreases private investment

Wrong! - Does Vietnam’s government budget surplus change the demand for or the supply of loanable funds? How does the real interest rate change? What effect does the change in the real interest rate have on the equilibrium quantity of loanable funds, private investment, and private saving? What is the effect of a change in private investment or a change in private saving on economic growth?

Correct! - Vietnam’s government budget surplus increases the supply of loanable funds. The real interest rate falls. The equilibrium quantity of loanable funds increases, which increases investment. An increase in investment creates economic growth.

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