AP Macroeconomics Question 67: Answer and Explanation

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Question: 67

5. A budget deficit exists when

  • A. the total amount that the government owes at a given time is positive
  • B. government spending exceeds tax collections for a given period
  • C. exports exceed imports in a given year
  • D. imports exceed exports in a given year
  • E. the total amount that the government owes at a given time is negative

Correct Answer: B

Explanation:

B The total amount that the government owes at a given time has to do with the national debt, not the balance of the budget. Exports compared with imports have to do with the trade surplus or deficit. Whether a budget deficit exists is based on the difference between government spending and tax collections for a given period (usually a year). If the government spends more than it collects in taxes, there is a deficit. If it spends less than it collects in taxes, there is a surplus. If it spends the same amount that it collects, then the budget is said to be "balanced."