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
A. increased by $90 billion.
B. increased by $20 billion.
C. decreased by $70 billion.
D. decreased by $20 billion.

Answer 1

Answer:

The correct answer is A. increased by $20 billion.

Explanation:

If you take the sum of the decreed values in deficit for years 1 and 2, you would have that the total amount of credits is $ 90 billion. On the other hand, for years 3 and 4 there are positive values for a total of $ 70 billion.

By the end of year 4 you have to have a pending balance of $ 20 billion, which is the result of subtracting the deficit minus the net surpluses generated in years 3 and 4.