Question : What is the purpose of a budget deficit?
Option 1: To increase government spending
Option 2: To stimulate economic growth
Option 3: To reduce government debt
Option 4: To provide a surplus for future years
Correct Answer: To stimulate economic growth
Solution : The correct answer is (b) To stimulate economic growth
The purpose of a budget deficit is to stimulate economic growth. A budget deficit occurs when a government's expenditures exceed its revenues or income, resulting in a shortfall that is typically financed through borrowing. While budget deficits are often viewed as negative because they contribute to government debt, they can serve as a deliberate policy tool to stimulate the economy.
During periods of economic downturn or recession, governments may intentionally implement deficit spending to boost aggregate demand and stimulate economic growth. By increasing government spending through the budget deficit, more money is injected into the economy, which can lead to increased consumption, investment, and job creation.
Budget deficits can help address a lack of private sector spending by providing additional funds that circulate in the economy. This increased spending can lead to increased business activity, job creation, and improved consumer confidence, all of which can contribute to economic growth.
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
Question : What is the difference between a budget deficit and a national debt?
Option 1: A budget deficit is the difference between government spending and revenue in a given year, while the national debt is the accumulation of all previous deficits
Option 2: A national debt is the difference between government spending and revenue in a given year, while a budget deficit is the accumulation of all previous deficits
Option 3: A budget deficit is a surplus in government spending, while a national debt is a deficit in government spending
Option 4: A national debt is a surplus in government spending, while a budget deficit is a deficit in government spending
Question : What is the purpose of a tax expenditure?
Option 1: To increase government revenue
Option 2: To reduce government spending
Option 4: To provide a tax break for certain activities or groups
Option 1: To pay down the national debt
Option 3: To decrease taxes
Option 4: To encourage economic growth
Question : What is the purpose of a stimulus package?
Option 2: To decrease taxes
Option 3: To encourage economic growth
Option 4: To pay down the national debt
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