Question

If the federal government collects more in taxes during a given year than it spends during that year, we have a federal budget surplus.

a) True
b) False

Answer 1

The statement is true; a federal budget surplus occurs when the government's tax collections exceed its spending for the year.

Step-by-step explanation:

If the federal government collects more in taxes during a given year than it spends during that year, we have what is known as a federal budget surplus. This statement is True. A budget surplus occurs when the government's income, primarily through taxes, exceeds its spending within a fiscal year.

Conversely, a budget deficit occurs when the government spends more than it receives. For instance, in 2020, the U.S. had a large budget deficit wherein the federal government spent approximately $3.1 trillion more than its tax revenues, constituting around 15% of the U.S. GDP for that year.

To provide a contrasting historical example, the U.S. federal government ran budget surpluses from 1998 to 2001.