Question

Budget deficit is the amount of money the government borrows for one budget (1 year) and national debt is the sum of all government borrowing.
a. True
b. False Reset Selection

Answer 1

Budget deficit is the amount of money that is missing after the government collected all the money it has and spends all the money it wants to spend. This money is typically borrowed - so this part is correct.

The national debt is the total debt of a nation, so this is also correct:

a) true

Answer 2

Answer: True.

A budget deficit occurs when expenditures exceed revenue. The government collects revenue mainly in the form of taxes. If the government spends more in a year than the money it has collected, it has a budget deficit. The difference needs to be obtained by borrowing money, normally in the form of government bonds.

If the government has budget deficits in separate years without being paid off, these start to accumulate. The accumulation of this borrowed money is what is called the national debt.