Question

Budget surpluses exist when:

A. government spending exceeds its tax revenues.
B. government tax revenues exceed its spending.
C. government spending equals its tax revenues.
D. expansionary fiscal policies increase real GDP and the price level.

Answer 1

A budget surplus occurs when government tax revenues exceed its spending, unlike a budget deficit, which happens when spending surpasses tax revenues. In 2009, the US experienced a significant budget deficit, underscoring what a surplus is not.

Step-by-step explanation:

Budget surpluses exist when government tax revenues exceed its spending. This means that the government has received more money from taxes than what it has spent over a specific period of time. A surplus is the opposite of a budget deficit, which occurs when government spending exceeds tax revenues. When government spending and taxes are equal, the government is said to have a balanced budget. For instance, the U.S. government ran a very large budget deficit in 2009, where it spent approximately $1.4 trillion more than the tax revenues collected, which was about 10% of the U.S. GDP for that year, illustrating a situation far removed from a surplus.