Surplus versus mirage.

It is important to distinguish between these elements, because there can be a financial surplus without productive results in line with monetary growth. This happens when inflation is involved, because productions are sold at prices much higher than their cost.

Today I am going to refer in a synthesized way to an issue that concerns and occupies all those who deal with the economy. I will talk about the surplus in the economic sphere.

Surplus refers to an excess of revenues over expenses, so that the difference between them is positive. It is very common to use the word surplus to refer to the state of the accounts of a country or an administration.

The excess of income over expenditure is a positive indicator in any economy, i.e. it is the opposite of a deficit.

For example, when a company’s income exceeds its expenses over a given period of time, we are talking about a surplus agent.

Likewise, the trade surplus is when the difference is positive, that is, there are more exports than imports. It is understood that this is the best result for a country, since resources are coming in from abroad. On the other hand, the trade deficit is the opposite and this difference is negative: it means that purchases made abroad exceed sales abroad.

A surplus can lead to confusion and cause a mirage. For example, when income exceeds expenditure, an equivalence must be made with the production of goods and services for society.

It is important to distinguish these elements, because there can be a financial surplus without productive results in line with monetary growth. This happens when inflation is involved, because productions are sold at prices much higher than their cost.

Inflation, like other indicators of macroeconomic instability, reduces both capital accumulation and total productivity, that is, less products and more money, that is why I speak of mirage.

Therefore, when we talk about surplus, let us not only look at income, but also at the goods and services purchased by the population. I have seen reports where they talk about the existence of a surplus in a given period and do not observe the same growth in the delivery of goods and services.

Written by Enrique Tirse.