Question

9. Suppose your local government has collected $1.4 million in revenue this year. They are planning on renovating the town hall, which will cost $500,000, building a senior center, which will cost $600,000, and cleaning up a local river, which will cost $400,000. What type of budget is your local government running?

Answer 1

This is a deficit budget. Deficits occur when a government's expenditures exceed the revenue that it generates like is the case for this budget. Although deficits can stimulate the economy, they are considered to signify aberrant decadent spending at the expense of future generations who will be left with a smaller endowment of invested capital