Question

29. Which one of the following describes the amount by which government spending exceeds government revenues?

A. Balance of trade
B. Budget deficit
C. Gross domestic product
D. Output gap

Answer 1

A budget deficit occurs when government spending exceeds government revenues, resulting in a shortfall.

Step-by-step explanation:

When the government spends more money than it receives in taxes in a given year, it runs a budget deficit. Conversely, when the government receives more money in taxes than it spends in a year, it runs a budget surplus. If government spending and taxes are equal, it has a balanced budget. For example, in 2009, the U.S. government experienced its largest budget deficit ever, as the federal government spent $1.4 trillion more than it collected in taxes. This deficit was about 10% of the size of the U.S. Gross Domestic Product (GDP) in 2009, making it by far the largest budget deficit relative to GDP since the mammoth borrowing used to finance World War II.