The situation whereby the government of a country spends more than its budgets for a given financial year is known as

Step 1: Analyze the question The question asks for the term used when a government spends more than it planned or earned for a financial year. The key idea is spending that exceeds the available revenue (or the budget).

Step 2: Explain the concept There are three main types of government budget:

• Surplus budget: Government revenue is greater than government expenditure (it earns more than it spends).
• Balanced budget: Government revenue equals government expenditure.
• Deficit budget: Government expenditure is greater than government revenue (it spends more than it earns). The gap is usually financed by borrowing, for example through treasury bills, bonds, or loans from the World Bank or IMF.

"Minus budget" is not a recognised term in economics.

Step 3: Apply to the question The government is spending more than its budget for the year. That means expenditure > revenue.

• A. Surplus: expenditure < revenue. This does not fit.
• B. Deficit: expenditure > revenue. This fits.
• C. Balanced: expenditure = revenue. This does not fit.
• D. Minus budget: not a real economic term.

Step 4: Answer The correct answer is B. Deficit budget.

Step 5: Exam tip Link the words: Deficit = Debt (you spend more than you have, so you may have to borrow). Surplus = Saving (you have extra left over). If you see "spends more than it earns," think deficit straight away.