Economics Fundamentals Practice Test 2025 – Complete Exam Prep

Question: 1 / 400

What occurs when a government's total revenue exceeds its total expenditures?

Fiscal deficit

Budget surplus

When a government's total revenue exceeds its total expenditures, this situation is referred to as a budget surplus. A budget surplus signifies that the government has more income than it spends, which can be a positive indicator of fiscal health. This surplus can be used in various ways, such as paying down existing debt, saving for future expenses, or investing in public services and infrastructure.

In contrast, fiscal deficit occurs when expenditures surpass revenues, while debt accumulation refers to the total outstanding debt of the government, which can increase during years of deficits. Deficit financing is a method used by governments to cover shortfalls when expenditures exceed revenues, often leading to borrowing. Knowing this distinction helps in understanding the implications of a budget surplus in economic analysis.

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Debt accumulation

Deficit financing

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