If a government's outlays exceed its revenues, the government is running a: _______. A) deficit and...
If a government's outlays exceed its revenues, the government is
running a: _______.
A) deficit and is a net saver of funds
B) surplus and is a net borrower of funds
C) deficit and is a net borrower of funds
D) surplus and is a net saver of funds
Homework Answers
Solution :
If a government's outlays exceed its revenues, the government is said to be running a deficit. A deficit implies that there is a shortage of funds. In case of shortage of funds, the government borrows funds to make up for the deficit and becomes a borrower of funds.
Thus the solution is Option C) deficit and is a net borrower of funds.
The other options are incorrect due to the following reasons:
A) deficit and is a net saver of funds
In a deficit, the government is a borrower of funds and not saver of funds. Hence this option is incorrect.
B) surplus and is a net borrower of funds
In a surplus, the government is a saver of funds and not borrower of funds. Hence this option is incorrect.
D) surplus and is a net saver of funds
If a government's revenues exceed its outlays, the government is running a surplus and is a saver of funds. Hence this option is incorrect.
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