Question

A budget surplus means that:

A) Government has spent more money than the Fed
B) Government has taken in more money than it spent
C) Fed has spent more money than the government
D) Government has spent more money than it took in

Answer 1

Option (B), A budget surplus indicates that the government has collected more money than it has spent in a given year. By contrast, a budget deficit occurs when spending exceeds revenue, such as the 2020 U.S. budget deficit of $3.1 trillion.

Step-by-step explanation:

A budget surplus means that the government has taken in more money than it spent. This occurs when the revenue collected from taxes and other sources exceeds the expenditures on government services and obligations in a given year. When the government has a budget surplus, it means that there is extra money available that could be used for paying down debt or for other purposes.

One example of a budget surplus in the U.S. can be observed when the government ran surpluses from 1998 to 2001. Conversely, a budget deficit occurs when the government spends more than what it collects in revenue; an example of which is the record $3.1 trillion budget deficit in 2020, which was approximately 15% of U.S. GDP in that year.