An increase in the government budget deficit:

a. occurs when there is an increase in government spending without a corresponding increase in taxes.

b. increases the outstanding government debt.

c. is an example of fiscal policy.

d. all of the above

The correct answer is (D) all of the above.

A government budget deficit refers to a situation where the government expenditure surpasses the government revenue. The accumulation of an entire deficit results in national debts. A state with a budget deficit resolves to reduce some spending and boost some of the tax-generating activities. Secondly, when the budget deficit rises, a country has to look for an alternative to getting more money to run the economy. Since government revenue is not enough to finance government expenditure, the government has to borrow some cash. For example, the money that the government borrows is in the form of a bond. Thirdly, the budget deficit is an example of fiscal policy. Any government of a particular country utilizes fiscal policy, for instance, government expenditure, to boost economic activities.