ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A budget surplus refers to a situation that has revenue higher than expenditure. Income is greater than the expenditure in the same time frame, such as the fiscal year or financial quarter. The federal government will be in a surplus budget if the tax revenues total exceeds the amount of government spending.

Detailed explanation-2: -If the government spends more than it collects in revenue, then there is a budget deficit. If the government spends less than it collects in revenue, there is a budget surplus. In fiscal year (FY) 2022, the government spent $6.27 trillion, which was more than it collected (revenue), resulting in a deficit.

Detailed explanation-3: -A government deficit occurs when more money is spent (often by borrowing) than what comes in as income. In the case of a national budget deficit, this means that government expenditures exceed inflows from taxes and other revenues, such as fines, duties, and fees.

Detailed explanation-4: -Running a budget surplus means there is additional money to spend at the end of the accounting period, which is generally a fiscal year. This extra cash can be used to pay off debts or be reinvested in other projects.

Detailed explanation-5: -The demand for money is the LM curve, when the government spends more money, it increases the AE curve thus increasing GDP. Therefore the investment/saving curve will shift due to the increases GDP which leads to increased Savings which leads to a lower interest rate.