Which of the following describes an annually balanced budget?
A) Budget deficits during recessions are covered by budget surpluses during expansions.
B) Budget deficits ensure that the economy produces at its potential output.
C) Budgets are balanced annually, except during war.
D) Budget deficits do NOT occur.

Question

Which of the following describes an annually balanced budget?  
A) Budget deficits during recessions are covered by budget surpluses during expansions. 
B) Budget deficits ensure that the economy produces at its potential output. 
C) Budgets are balanced annually, except during war. 
D) Budget deficits do NOT occur.

Quizplus · Accepted Answer

An annually balanced budget means that the government's expenditures are equal to its revenue each year, resulting in a balanced budget. This option is described as budgets are balanced annually, except during war, which suggests that during times of war, the government may need to run a deficit in order to fund necessary expenses. Option A describes a balanced budget over the long term, but not necessarily annually. Option B is incorrect as budget deficits do not necessarily ensure output at potential. Option D is also incorrect as budget deficits can and do occur.

Which of the Following Describes an Annually Balanced Budget