Question

if government spending is higher than current government revenue, this is known as select one a...

if government spending is higher than current government revenue, this is known as

select one

a money financing

a deficit on the current account of balance of payment

the budget deficit

the public dept

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Answer #1

Hi there,

The answer for the given question is the 3rd option, i.e. the budget deficit.

Here's the reason why?

It is important to understand how government generates revenue? It is generally from the various forms of taxes that are paid by the people living in that particular country which includes income taxes, excise taxes etc. and if the taxes are less than the spending, it is known as budget deficit.

No revenue is earned by borrowing from and owing to any other country which is known as public debt. It is also not money financing. Talking about deficit on the current account of balance of payment which means a country imports more than its exports which is not the case. In this case, government borrows money to pay for their imports.

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