et deficits increase when governmental spending surpasses revenue, leading to potential economic stimulation or higher public debt. A budget surplus occurs when spending is below revenue, which might slow economic growth but decrease debt.
Step-by-step explanation:
When discussing budget deficits and surpluses, the reference appears to be towards fiscal policy and its outcomes. For the scenario presented in chart (a), an increase in the budget deficit or a decrease in the budget surplus could imply that a government is spending more than it is earning in revenue. This scenario might lead to potential results such as an increase in public debt, stimulation of economic growth, or changes in interest rates depending on how the surplus funds were used. Alternatively, chart (b) suggests that a fall in the budget deficit or a rise in the budget surplus signifies that a government is spending less than it is earning, which could result in lower public debt, potential slowing of economic growth, or decreased interest rates if the government decides to reduce borrowing.