Lesson 1168 of 1524
Government Budgets and Fiscal Policy
When a government spends more than it collects in taxes, it is said to have a budget deficit.
Practice this chapterWhen a government spends more than it collects in taxes, it is said to have a budget deficit. When a government collects more in taxes than it spends, it is said to have a budget surplus.
If government spending and taxes are equal, it is said to have a balanced budget. Fiscal policy is the set of policies that relate to federal government spending, taxation, and borrowing.
balanced budget — when government spending and taxes are equal. budget deficit — when the federal government spends more money than it receives in taxes in a given year. budget surplus — when the government receives more money in taxes than it spends in a year. proportional tax — a tax that is a flat percentage of income earned, regardless of level of income.
Worked example
What does “balanced budget” mean in Government Budgets and Fiscal Policy?
- 1Use the wording this chapter gives for balanced budget.
- 2The book says: when government spending and taxes are equal.
- 3Do not use the meaning of budget deficit. That term means when the federal government spends more money than it receives in taxes in a given year.
Result: when government spending and taxes are equal
Why. That is the meaning this chapter gives for balanced budget.
Do not swap balanced budget and budget deficit. balanced budget means when government spending and taxes are equal. budget deficit means when the federal government spends more money than it receives in taxes in a given year.
Practice margin
This chapter
A fresh set from this chapter only. Choose 10 or 20. Multiple choice and fill-in, with no repeat inside the set.