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Chapter 30: Q. 2 (page 741)

When governments run budget surpluses, what is done with the extra funds?

Short Answer

Expert verified

Surpluses are largely used by the government to lower the federal debt.

Step by step solution

01

Step 1. Define budget surplus.

A budget surplus is formed when income exceeds expenses. Individuals have "savings" rather than a "budget surplus," hence the term is usually used to describe the state of a government's finances. A budget surplus means the government's finances are in good shape.

02

Step 2. What is done with the extra funds?

A surplus occurs when the government collects more money than it spends. The government mostly uses surpluses to reduce the federal debt. The money might be used to pay down the national debt or given back to taxpayers.

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Most popular questions from this chapter

Suppose that gifts were taxed at a rate of 10%for amounts up to $100,000and 20%for anything over that amount.

Would this tax be regressive or progressive?

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How would a balanced budget amendment change the effect of automatic stabilizer programs?

Give some examples of changes in federal spending and taxes by the government that would be fiscal policy and some that would not.

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