If government spending exceeds tax collections?
Correct answer: A. there is a budget deficit
- A. there is a budget deficit
- B. None of these answers
- C. There is a budget surplus
- D. private saving is positive
Explanation
A budget deficit occurs when government spending exceeds its tax revenue, requiring borrowing or another source of finance. A surplus is the opposite situation, when tax collections exceed spending.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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