Question : What is the difference between a surplus and a deficit?
Option 1: A surplus is when the government spends more money than it takes in, while a deficit is when the government takes in more money than it spends
Option 2: A surplus is when the government takes in more money than it spends, while a deficit is when the government spends more money than it takes in
Option 3: A surplus is when the government has no debt, while a deficit is when the government has debt
Option 4: A surplus is when the government has debt, while a deficit is when the government has no debt
Correct Answer: A surplus is when the government takes in more money than it spends, while a deficit is when the government spends more money than it takes in
Solution : The correct answer is (b) A surplus is when the government takes in more money than it spends, while a deficit is when the government spends more money than it takes in.
A surplus occurs when the government's revenues, typically from taxes and other sources, exceed its expenditures or spending. In other words, the government has more income than expenses during a given period, resulting in a surplus of funds. A surplus can be used to pay down debt, invest in infrastructure, or be saved for future needs.
On the other hand, a deficit occurs when the government's spending exceeds its revenues. This means that the government is spending more money than it is bringing in through taxes and other sources of income. To cover the shortfall, the government may borrow money by issuing debt, such as Treasury bonds, or rely on other sources of financing.
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