Question : What is the purpose of a budget surplus?
Option 1: To reduce government debt
Option 2: To increase government spending
Option 3: To stimulate economic growth
Option 4: To provide a surplus for future years
Correct Answer: To reduce government debt
Solution : The correct answer is (a) To reduce government debt
The purpose of a budget surplus is to reduce government debt. A budget surplus occurs when a government's revenues or income exceed its expenditures. In other words, the government collects more money than it spends during a specific period.
A budget surplus allows the government to generate excess funds that can be used to pay down existing debt or prevent the accumulation of further debt. By reducing government debt, the government can improve its financial position, lower interest payments, and allocate resources towards other priorities such as investments, infrastructure development, or social programs.
Budget surpluses are often seen as a sign of fiscal responsibility and financial stability. They demonstrate that a government is able to live within its means and have funds available for future needs or emergencies. Surpluses can also help build confidence among investors, creditors, and financial markets, leading to lower borrowing costs for the government in the future.
