Question

If there was a federal budget surplus and the government decided to either increase spending or decrease taxes,

A.The budget surplus would get smaller.
B.The budget surplus would remain unchanged.
C.The budget surplus would get larger.
D.None of the choices are correct.

Answer 1

Increasing government spending or decreasing taxes when there is a budget surplus would result in the surplus getting smaller. This concept is important in understanding how government budgets work and the impacts of fiscal policy on the economy.

Step-by-step explanation:

If there was a federal budget surplus and the government decided to either increase spending or decrease taxes, the correct answer would be A. The budget surplus would get smaller. A budget surplus occurs when the government receives more money in taxes than it spends. Therefore, if the government opts to increase its spending without raising taxes or reduce taxes without cutting spending, it will be using up some of that surplus. As a result, the surplus becomes smaller. This concept is important in understanding how government budgets work and the impacts of fiscal policy on the economy.