HISET Social Studies Practice

Which scenario describes a Budget Surplus?

1. Spending aligns with revenues

2. Revenues outpace government spending

3. Increased government borrowing

4. A drop in tax revenues

The correct answer is: Revenues outpace government spending

A budget surplus occurs when a government’s total revenues exceed its total expenditures over a certain period, typically a fiscal year. In this context, when revenues outpace government spending, it indicates that the government is collecting more money than it is spending. This surplus can be used to pay down debt, save for future investments, or fund additional programs without having to borrow. The other scenarios illustrate different financial situations. Spending aligning with revenues indicates a balanced budget, which is neither a surplus nor a deficit. Increased government borrowing suggests a budget deficit, where spending exceeds revenues, leading to the need for borrowing to make up the difference. A drop in tax revenues can also signal a budget deficit, as reduced income would mean the government has less money to spend relative to its existing commitments.