Many communities today are concerned with their local government’s ability to appropriately manage the taxes it collects. If a government spends more money on expenditures than it collects in taxes, it may end up with not enough money, called deficit. Which of the following could result in a county government budget in deficit?
Answer
A
The government raises sales and property taxes without adjusting expenditures.
B
The county closes a fire station, reducing expenditures, without adjusting taxes.
C
The county gives all public school teachers a $2,000 raise without adjusting taxes.
D
The county collects donations to build a fountain in city hall.
Explanation
A deficit can result when spending rises without a matching increase in revenue. Giving every public school teacher a $2,000 raise increases the county’s expenditures, while taxes stay unchanged, so the county could spend more than it collects. The other choices either increase revenue, reduce expenditures, or provide donations for a specific project.
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