What does a budget deficit indicate?
Show answer & explanation
Correct answer: C
Explanation
The correct Answer is option 3 i.e. Government spending exceeds government revenue .
A budget deficit occurs when the government’s total expenditure exceeds its total revenue (excluding borrowings) in a fiscal year. This indicates that the government is spending more than it earns, often to fund development projects, subsidies, or social welfare programs. To cover the deficit, the government may borrow from domestic or foreign sources, issue bonds, or use its reserves. Persistent budget deficits can lead to increased public debt but may also stimulate economic growth if used for productive investments.
Other options:
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Government revenue exceeds spending: This is a budget surplus, not a deficit.
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Government is saving for future projects: This implies surplus or balanced budget, not deficit.
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Not allocating enough for public services: Irrelevant to the definition of a budget deficit.