A balanced budget occurs when
A) the national debt is reduced to zero dollars.
B) a budget deficit during one year is matched by a budget surplus in the next year.
C) transfer payments equal tax revenues.
D) government expenditures equal tax revenues.
E) the deficit-GDP ratio equals one.

Question

Quizplus · Accepted Answer

A balanced budget occurs when government expenditures equal tax revenues, meaning the government is neither running a budget surplus nor a budget deficit. Option A is incorrect because the elimination of the national debt does not necessarily imply a balanced budget. Option B is incorrect because it implies a cyclic movement between budget deficits and surpluses, not a consistent state of balance. Option C is incorrect because transfer payments are just a portion of government expenditures and do not necessarily match tax revenues. Option E is incorrect because the deficit-GDP ratio is a measure of the budget deficit relative to the size of the economy, not an indicator of a balanced budget.

A Balanced Budget Occurs When