False. When the federal government's spending exceeds its receipts, a deficit occurs.
- Theoretically, a rise in the fiscal deficit might stimulate a sluggish economy by increasing consumer spending and investment opportunities by giving people more money. However, long-term deficits may be harmful to stability and economic growth.
- When a government spends more in a given year than it receives in revenue, such as taxes, it has a budget deficit. As a straightforward illustration, consider a government that receives $10 billion in revenue one year but spends $12 billion, creating a $2 billion deficit.
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