Budget balance shifts from surplus to deficit

Steps:

• Calculate budget balance for each year: surplus if revenue exceeds spending, deficit if spending exceeds revenue.
• Year 1: 100bn revenue - 90bn spending = 10bn surplus.
• Year 2: 115bn - 110bn = 5bn surplus.
• Year 3: 110bn - 130bn = 20bn deficit.

Why A is correct:

• Budget surplus occurs when revenue > spending; deficit when spending > revenue; data shows surpluses in years 1-2 turning to deficit in year 3.

Why the others are wrong:

• B: Debt reduction requires sustained surpluses and initial debt levels, but data alone does not confirm falling debt.
• C: Current account balance involves trade and net income, unrelated to government fiscal data.
• D: Full employment equilibrium concerns labor market conditions, not fiscal spending or revenue.

Final answer: A