A budget deficit occurs when

A budget deficit occurs when

• A. When the revenue is greater than the expenditure
• B. When revenue equals expenditure
• C. When expenditure is greater than revenue
• D. When revenue is zero

Answer: (C)

In any budget, you compare how much money you take in (revenue) with how much you spend (expenditure). A budget deficit happens when spending is more than income, so you have to borrow or dip into savings to cover the shortfall. That’s why the statement where expenditure exceeds revenue is the correct description. If revenue is greater than expenditure, you’d have a surplus. If revenue equals expenditure, the budget is balanced. Revenue being zero is not the general definition of a deficit, although spending with no income would indeed create a shortfall. The key idea is that deficit means spending exceeds income.

In any budget, you compare how much money you take in (revenue) with how much you spend (expenditure). A budget deficit happens when spending is more than income, so you have to borrow or dip into savings to cover the shortfall. That’s why the statement where expenditure exceeds revenue is the correct description.

If revenue is greater than expenditure, you’d have a surplus. If revenue equals expenditure, the budget is balanced. Revenue being zero is not the general definition of a deficit, although spending with no income would indeed create a shortfall. The key idea is that deficit means spending exceeds income.