Budget Deficit Drives Economic Stimulus

Steps:

• Recall that a budget deficit occurs when government expenditures surpass revenues, injecting money into the economy.
• Understand that this deficit spending increases aggregate demand, boosting output and employment via fiscal policy.
• Evaluate choices: A and B relate to tax types or savings-investment balance, not deficit definition.
• Select D, as it directly matches the deficit condition for economic expansion.

Why D is correct:

• By definition, a budget deficit equals government spending exceeding revenue, allowing stimulus through higher public expenditure on goods, services, and transfers.

Why the others are wrong:

• A: Tax composition (direct vs. indirect) affects revenue structure but doesn't define or create a deficit.
• B: Government savings exceeding investment implies a surplus, opposite of deficit spending.
• C: Export surplus describes trade balance, unrelated to fiscal deficit.

Final answer: D