Which of the following best describes the circumstances in which a government will run a budget deficit?

Choose 1 answer:
(A) Tax revenues are less than the sum of the government spending component of real GDP and transfer payments
(B) When a government runs a high debt to income ratio
(c) When a government engages in contractionary fiscal policy
(D) The accumulation of budget shortfalls over time
(E) Tax revenues are more than the sum of the government spending component of real GDP and transfer payments

Question

Which of the following best describes the circumstances in which a government will run a budget deficit?

Choose 1 answer:
(A) Tax revenues are less than the sum of the government spending component of real GDP and transfer payments
(B) When a government runs a high debt to income ratio
(c) When a government engages in contractionary fiscal policy
(D) The accumulation of budget shortfalls over time
(E) Tax revenues are more than the sum of the government spending component of real GDP and transfer payments

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ Identify the definition of a budget deficit: A budget deficit occurs when the government's expenditures exceed its tax revenues. ‖ ‖ step 2 ⋮ Analyze the answer choices in relation to the definition of a budget deficit: We look for the option that reflects the situation where government spending plus transfer payments are greater than tax revenues. ‖ ‖ step 3 ⋮ Compare the answer choices to the definition: Answer choice A directly states that tax revenues are less than the sum of government spending and transfer payments, which aligns with the definition of a budget deficit. ‖ ∻Answer∻ ***A*** ∻Key Concept∻ ⚹Budget Deficit⚹ ∻Explanation∻ ⚹A budget deficit occurs when a government's spending and transfer payments exceed its tax revenues.◊What is the relationship between tax revenues, government spending, and transfer payments in the context of a government running a budget deficit?⍭ Generate me a similar question◊⚹

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