A balanced budget is present when Group of answer choices the economy is at full employment. the actual level of aggregate spending equals the planned level of spending.public sector spending equals private sector spending.government revenues equal government expenditures.
The Correct Answer and Explanation is :
The correct answer is: government revenues equal government expenditures.
Explanation:
A balanced budget occurs when a government’s revenues (mainly through taxes and other sources) are equal to its expenditures (spending on public goods, services, and welfare programs). This concept is critical in macroeconomics, where a government’s fiscal position is a key determinant of economic stability.
When a government runs a balanced budget, it ensures that it does not need to borrow money to finance its expenditures, which can help prevent the accumulation of public debt. In this situation, the government’s fiscal policy is considered sustainable, as it does not rely on borrowing from external sources or the domestic financial market to cover deficits.
However, it’s important to note that achieving a perfectly balanced budget in practice is challenging. Economic conditions like recessions, inflation, or changes in tax revenues can lead to deviations from this balance. For instance, during recessions, tax revenues often fall because of reduced income and consumption, while government expenditures on welfare programs tend to rise, potentially leading to budget deficits. Conversely, in times of economic growth, tax revenues typically increase, and governments might run surpluses.
Other options provided, such as “the economy is at full employment” or “aggregate spending equals planned spending,” describe specific macroeconomic conditions or concepts that are not directly related to the balanced budget definition. Full employment is a state where all who are willing and able to work have a job, and planned spending refers to anticipated levels of expenditure, but these do not necessarily indicate whether the budget is balanced or not.
A balanced budget is also distinct from the idea of “public sector spending equals private sector spending,” as government spending can vary widely from private sector spending based on the government’s fiscal policies, which may include stimulus measures or austerity strategies.