Starting from a balanced budget, for a given tax rate, an increasing in income will cause the government budget to ?
Correct answer: A. move into surplus
- A. move into surplus
- B. move into deficit
- C. remain unchanged
- D. None of the above above
Explanation
When income rises at a fixed tax rate, tax revenue increases while government spending is initially unchanged. The resulting excess of revenue over expenditure moves the budget into surplus.
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