Question : What is the difference between a balanced budget and a deficit budget?
Option 1: A balanced budget spends as much as it earns, while a deficit budget spends more than it earns
Option 2: A balanced budget earns as much as it spends, while a deficit budget spends more than it earns
Option 3: A balanced budget spends more than it earns, while a deficit budget earns more than it spends
Option 4: A balanced budget earns more than it spends, while a deficit budget spends as much as it earns
Correct Answer: A balanced budget spends as much as it earns, while a deficit budget spends more than it earns
Solution : The correct answer is (a) A balanced budget spends as much as it earns, while a deficit budget spends more than it earns.
A balanced budget refers to a situation where a government's expenditures equal its revenues or income. In other words, the government spends only what it earns through various sources such as taxes, fees, and other revenue streams. This results in a balance between income and expenditure.
On the other hand, a deficit budget occurs when a government's expenditures exceed its revenues. In this case, the government spends more money than it earns, leading to a deficit or shortfall. The deficit is typically financed through borrowing, such as issuing government bonds or taking loans.
So, the main difference between a balanced budget and a deficit budget is that a balanced budget spends as much as it earns, while a deficit budget spends more than it earns.
