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The sum of public spending on goods and services and transfer payments during a given period...

The sum of public spending on goods and services and transfer payments during a given period cannot exceed tax revenues plus borrowed funds. This is the statement for

a sales tax.

the government budget constraint.

an excise tax.

ad valorem taxation.
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Homework Answers

Answer #1

Since government expenditure includes spending on goods and services and transfer payments during a given period of time.

The sources of revenue or income for government is tax revenue and borrowed funds when government expenditure is greater than the tax revenue, then government borrows from loanable fund market.

Hence government cannot spent more than the sum of tax revenue and borrowed fund, this is called the government budget constraint.

Hence it can be said that if the sum of public spending on goods and services and transfer payments during a given period cannot exceed tax revenues plus borrowed funds. This is the statement for the government budget constraint.

Hence option second is the correct answer.

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