BAFI3273 W2 Government borrowings and money markets

What is government's budget surplus?

• A government's budget surplus is when expenditures exceed revenues.
• A government's budget surplus is when revenues exceed expenditures.
• A government's budget surplus is when revenues equal expenditures.
• A government's budget surplus is when the government borrows money.

What are two common causes of budget deficit?

• Increased government spending and increased tax revenue

• Reduced government spending and increased tax revenue

• Government spending and reduced tax revenue

• Increased tax revenue and reduced government spending

How does budget deficit affect interest rates?

• Interest rates remain the same

• Lower interest rates

• Higher interest rates

• No impact on interest rates

What are two causes of budget surplus?

• Increased tax revenue and increased government spending

• Decreased tax revenue and increased government spending

• Excess tax revenue and reduced government spending

• Excess tax revenue and increased government spending

Explain how increased tax revenue can lead to a budget surplus.

• Increased tax revenue leads to a decrease in government funds

• Increased tax revenue has no impact on the budget surplus

• Increased tax revenue provides more funds for the government to cover expenses and potentially create a budget surplus.

• Increased tax revenue leads to an increase in government spending

How does budget surplus affect government borrowing?

• It increases government borrowing

• It has no effect on government borrowing

• It leads to a decrease in government revenue

• It reduces government borrowing or may eliminate the need for borrowing.

What are government securities?

• Government securities are debt instruments issued by a government to finance its expenditures.
• Government securities are loans given to individuals by the government.
• Government securities are stocks issued by private companies.
• Government securities are physical assets owned by the government.

What is the impact of a budget surplus on public services?

• It allows for increased funding for public services.

• It leads to privatization of public services.

• It reduces funding for public services.

• It has no impact on public services.

What role do government bonds play in financing a budget deficit?

• They are used to pay off existing debts.

• They are only used for surplus financing.

• They have no role in financing a budget deficit.

• They help raise funds to cover the deficit.

How can a government achieve a balanced budget?

• By increasing expenditures and reducing revenues.

• By reducing tax rates.

• By matching expenditures with revenues.

• By borrowing more money.