Question

Which of the following is true when the government is deficit spending?

I. The government is saving money.
II. Tax revenue is greater than government spending.
III. Spending is greater than tax revenue.


I only.
II only.
III only.
I and II only.
I and III only.

Answer 1

The answer is the third choice - III only.

A deficit occurs when the government spends more than the tax revenue. Deficit spending is the difference between the government spending and the revenue over a period of time. This is usually a central point of controversy in economics.