A budget surplus exists when a government's tax receipts exceed its total expenditures in a given year.
(Mankiw, N. Gregory, Ronald Kneebone, Kenneth J. McKenzie and Nicholas Rowe. 2008. Principles of Macroeconomics, 4th Canadian ed. Toronto: Thomson Nelson, p.172.)
When there is a surplus, the government becomes an additional source of loanable funds, which generally places downward pressure on interest rates, causing investment to increase.
Organized by Ben Eisen based on lecture notes from Peter Dungan’s PPG 1003H and Mankiw et al. 2008.