Publication Details
Abstract
The government budget can either be in deficit or surplus. A deficit occurs when the government spends more than its revenue, while a surplus happens when government revenues exceed its expenditures. As a result, a deficit in the government budget adds net financial assets to the private sector because a budget deficit means the government has deposited more money and bonds into private assets, whereas a surplus means the opposite. The government has three options to meet its expenditures. The first option is that the government can generate revenue by imposing taxes. The second option is that the government may direct its expenditures by borrowing, issuing government debt instruments such as treasury bills and government bonds. The third option is that the government can issue currency and use it to pay for goods and services it wishes to purchase.