Question

Suppose the federal government had budget deficits of $40 billion in year 1 and $50 billion in year 2 but had budget surpluses of $20 billion in year 3 and $50 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the federal government's public debt would have:

Answer 1

Answer:

At the end of these four years, the federal government's public debt would have increased by $20 billion

Explanation:

Year 1:

Budget deficit=$40 billion

Year 2:

Budget deficit=$50 billion

Total budget deficit=$90 billion

Year 3:

Budget surplus=$20 billion

Year 4:

Budget surplus=$50 billion

Total budget surplus=$70 billion

Budget surplus - Budget deficit= $90 billion - $70 billion

=$20 billion

At the end of these four years, the federal government's public debt would have increased by $20 billion