Question

If the government owes $10.0 trillion and then borrows $700 billion more this year, this leads toa. a debt of $700 billion and a deficit of $10.7 trillion.b. a debt of $9.3 trillion and a deficit of $700 billion.c. a debt of $10.0 trillion and a deficit of $9.3 trillion.d. a debt of $10.7 trillion and a deficit of $700 billion.e. a debt of $10.7 trillion and a deficit of zero.

Answer 1

Answer:

E:  a debt of $10.7 trillion and a deficit of zero.

Explanation:

Deficits are usually financed by debt. Here the government has incurred an extra debt of $700 billion. The previous debt of $10 trillion may have been due to any reason and not necessarily deficit. However, the passage does not state if the extra debt is due to deficit or not. So it is safe to select option E.

Hence, the government has incurred a total debt of $10.7 trillion and a deficit of zero.