Question

The sum of public spending on goods and services and transfer payments during a given period cannot exceed tax revenues plus borrowed funds. This is the statement for___________.a. a sales tax.b. an excise tax.c. the government budget constraint.d. ad valorem taxation.

Answer 1

Answer:

The correct answer is letter "C": the government budget constraint.

Explanation:

In the case of the U.S., the government budget constraint refers to the decision the Federal Reserve (Fed) must make to balance the money growth with the interest rate, the decision the Internal Revenue Service (IRS) to weigh taxes with borrowing and spending.  

Government constraints state that tax revenues and borrowed funds should be higher than public spending and payment transfers otherwise the government would be in deficit. For that reason, it is recommended that the government outflows be lower than its inflows which represents a government surplus.