In economic terms, what does a surplus refer to?

• A. An abundant supply of goods
• B. A shortage of food
• C. A balanced budget
• D. An economic recession

Answer: (A)

A surplus in economic terms refers to an abundant supply of goods available in the market. This concept signifies that the quantity of goods or resources exceeds the demand for them, which can lead to lower prices or unsold inventory. In a healthy economy, a surplus can encourage competition among suppliers and can prompt adjustments in production to better align with consumer demand.

Understanding the implications of a surplus is crucial in economics, as it can affect prices, production levels, and overall market conditions. It indicates an efficient allocation of resources, though prolonged surpluses can also signal underlying issues in consumption patterns or market saturation.

The other options reflect different economic concepts that do not align with the definition of a surplus. A shortage of food refers to insufficient supply to meet demand, a balanced budget indicates that revenues equal expenditures, and an economic recession describes a significant decline in economic activity across the economy. Each of these terms conveys distinct conditions contrary to the notion of a surplus.