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You'll have to take some notes on this question. The government's budget balan...

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You'll have to take some notes on this question.

The government's budget balance has a simple formula:

B u d g e t space B a l a n c e space equals space R e v e n u e space minus space E x p e n s e s

The government's revenue is what it earns through taxes (T). Its expenses are all its spending, including its purchase of goods/services (G) as well as transfer payments. If the two match, the government will have a balanced budget. If its revenues are higher, it will have a budget surplus. If the expenses are higher, it will have a budget deficit.

Now, suppose that the government initially has a balanced budget, then it starts spending more to stimulate the economy and create jobs. This will result in a for the government.

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