Florida Teacher Certification Examinations (FTCE) Subject Area Practice Test

What is the result when a nation's expenditure exceeds its revenue?

1. Surplus

2. Deficit

3. Excess

4. Balance

The correct answer is: Deficit

When a nation's expenditure exceeds its revenue, it leads to a fiscal situation known as a deficit. This occurs when the government spends more money than it brings in through various sources of income, such as taxes, fees, and other revenues. A deficit indicates that the government must borrow money to cover its expenses, which can lead to an increase in national debt over time. Understanding the implications of a deficit is crucial, as it can affect a country's economic stability and can influence policies around taxation, spending, and borrowing in the future. This concept is fundamental in economics, providing insight into government financial health and its potential impacts on the economy as a whole. The other terms, such as surplus, refer to when revenue exceeds expenditure, while balance indicates that revenue and expenditure are equal. Excess is not typically used in this context and does not convey a standard fiscal outcome. Thus, the definition and implications of a deficit clarify why this answer is the most appropriate in the context of the question.