Which of the following is a direct consequence of a budget surplus?

Practice Questions

Q1
Which of the following is a direct consequence of a budget surplus?
  1. Increased public spending
  2. Reduction in national debt
  3. Higher taxes
  4. Increased inflation

Questions & Step-by-Step Solutions

Which of the following is a direct consequence of a budget surplus?
  • Step 1: Understand what a budget surplus is. A budget surplus occurs when a government's income is greater than its expenses.
  • Step 2: Recognize that when the government has extra money (the surplus), it can use that money for various purposes.
  • Step 3: One of the main uses of a budget surplus is to pay off national debt, which is the money the government owes.
  • Step 4: By using the surplus to pay down debt, the government reduces the total amount it owes, which can help improve its financial situation.
  • Step 5: Therefore, a direct consequence of a budget surplus is the reduction of national debt.
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