Question

The following strategies are balancing tactics:

A) Local and state budgets may be considered balanced even when rainy day funds are drawn down.
B) In some states, the budget may balance with borrowing.
C) At state and local level, prior years' surplus may be used to
balance the current year's budget.
D) At federal level, trust funds may be applied against deficits in other funds.
E) All

Answer 1

Different governments use various tactics to balance their budgets, which includes the use of rainy day funds, borrowing, utilizing prior year surpluses, and applying trust funds against deficits. These strategies allow governments to navigate financial discrepancies and maintain fiscal responsibility over the short term.

Step-by-step explanation:

The question addresses various balancing tactics that governments may use to manage their budgets. Governments at different levels use different strategies to achieve a balanced budget. Here are the tactics provided:

• (A) Local and state budgets may be balanced by drawing down rainy day funds, which are reserves set aside for unexpected financial needs.
• (B) Some states may balance their budgets through borrowing, despite potentially leading to long-term debt obligations.
• (C) Using a prior year's surplus to balance the current year's budget allows governments to manage cyclical fluctuations in revenue and expenses.
• (D) At the federal level, deficits in one fund can be offset by surpluses in trust funds, although this can raise concerns about long-term sustainability.
• (E) All of the above tactics are used by governments as part of fiscal policy to maintain budgetary balance.