PRC-3 · Chapter 16 · Question 9 of 20
When the government's total planned spending for the year far exceeds the total revenue it expects to collect from taxes, the government is operating with a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Budget deficit
Explanation
A budget deficit occurs when government expenditures exceed government revenues, requiring the government to borrow money to cover the shortfall.
More Public Finance MCQs
- Q11A government introduces an income tax where low-income earners pay 5% and wealthy executives pay 40%. This system, which satisfies the…
- Q12If a government imposes a fixed Rs. 100 tax on every citizen regardless of whether they earn Rs. 10,000 or Rs. 10 million, this tax takes…
- Q13Adam Smith's 'Canon of Certainty' regarding taxation dictates that:
- Q14Which of the following is the defining characteristic of a 'Direct Tax' (like Corporate Tax)?
- Q15A consumer buys a laptop. The price includes a 17% General Sales Tax (GST). The store collects this money and gives it to the government…