Question

Which of the following is true of the federal budget deficit?

a.
The federal budget deficit is usually larger than the national debt.

b.
The federal budget deficit is equal to the interest payments on the national debt.

c.
The federal budget deficit is equal to the excess of federal spending relative to federal revenues during a year.

d.
The federal budget deficit is financed by the printing of money and therefore it is equal to the increase in the money supply during the year.

Answer 1

The federal budget deficit is equal to the excess of federal spending relative to federal revenues during a year.

Step-by-step explanation:

A federal budget deficit occurs when planned expenditures in the country exceed the projected revenue collection. In short, expenses exceed income. A country will have a budget deficit if it spends more than it collects from taxes and other sources.

A budget deficit is financed through borrowing. The Federal budget deficit can be reduced by increasing revenue collection or cutting down expenses. Collecting more revenue can be achieved by raising taxes or increasing economic growth. Raising taxes requires much consideration; excessive taxation may slow down economic growth.