Question

Which of these is not a result of the federal government spending more than it earns? (5 points)

Answer 1

Budget Surplusses; This means that the budget is increased. Budget deficits means that the budget is decreased, so that IS a reason.

Answer 2

The correct answer is: "Budget surpluses".

Budget surpluses  occur actually in the opposite situation, when the goverment spends less than it earns. Therefore, there is extra liquidity that can be used to cancel former debt or it can be translated into tax cuts because the public sector does not need such large revenues to cover costs anymore.

On the other hand, if there is a budget deficit the state spends more than it collects and, therefore, the national debt increases. One of the ways to finance that debt could be through a tax increase.