HISET Social Studies Practice

What defines a 'Balanced Budget'?

1. A situation in which the government overspends

2. Revenues are less than expenditures

3. Revenues are equal to spending

4. Excess funds available for unexpected expenses

The correct answer is: Revenues are equal to spending

A 'Balanced Budget' is defined as a situation in which revenues are equal to spending. This means that the government is not running a deficit or surplus; it is managing its finances in such a way that the amount of money it earns (through taxes and other sources) matches exactly what it spends on various programs and services. This approach is often seen as fiscally responsible, as it prevents the accumulation of debt. In the context of the other options, overspending by the government indicates a deficit, where expenditures exceed revenues, which is not consistent with a balanced budget. Additionally, if revenues were less than expenditures, this would further reinforce the notion of a deficit rather than balance. Lastly, having excess funds available suggests a surplus, where revenues exceed expenditures, which again is not indicative of a balanced budget. Therefore, the correct understanding is indeed that a balanced budget is characterized by revenues being equal to spending.