Question

Statement (1): When public expenditure exceeds public revenue, the gap is filled by public debt.

Statement (2): When public revenue exceeds public expenditure, we have surplus budget.

Options

• Both statements are true.

• Both statements are false.

• Statement 1 is true but Statement 2 is false.

• Statement 2 is true but Statement 1 is false.

Answer 1

Both statements are true.

Explanation:

• Statement (1): A budget deficit occurs when a government’s total public expenditure exceeds its revenue. To close the financial gap and meet its surplus spending needs, the government must borrow money from internal or external sources, resulting in public debt.
• Statement (2): A surplus budget is specifically defined as an economic condition in which the government’s total estimated tax revenue exceeds its anticipated expenditures for the fiscal year.