In which of the following situations does the government run a deficit budget?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. When the government expenditure exceeds revenue.
A government runs a deficit budget when its expenditure is greater than its revenue. This is also known as deficit financing.
Explanation
- Revenue deficit: When the government's revenue from taxes and other sources is not enough to cover its daily expenses
- Fiscal deficit: When the government's total expenses are more than its total income
- Budget deficit: When the government's current expenses are more than its income from standard operations.