Question

Which of the following is not correct about a budget surplus? Select the correct answer below:

A. A budget surplus is a financial situation in which the government receives more money in taxes then it spends in a year.
B. A budget surplus is more likely during an economic boom when tax revenues increase due to increase economic activity.
C. A budget surplus is a financial situation in which the government spending taxes are equal.
D. A budget surplus is regards government's need to borrow.

Answer 1

The incorrect statement about a budget surplus is that it occurs when the government's spending and taxes are equal; this actually describes a balanced budget, not a surplus. Surpluses are more likely during economic booms and do not generally require government borrowing.

Step-by-step explanation:

Among the options provided regarding a budget surplus, the statement that is not correct is: C. A budget surplus is a financial situation in which the government spending taxes are equal. This describes a balanced budget, not a surplus. A budget surplus actually occurs when the government receives more money in taxes than it spends within a fiscal year. A surplus is indeed more likely during an economic boom because tax revenues generally increase due to heightened economic activity, as stated in option B. Option D is also inaccurate, because when there is a budget surplus, the government generally does not need to borrow; rather, borrowing is associated with a budget deficit, where government spending exceeds tax revenue. For instance, in 2020, the U.S. government experienced a significant budget deficit of $3.1 trillion, much larger than the surplus periods.