Suppose a new country is formed, and its government has the following revenues and expenditures for its first three years of existence.
Which of the following is correct regarding this government?

Question

Suppose a new country is formed, and its government has the following revenues and expenditures for its first three years of existence. 
Which of the following is correct regarding this government?

Quizplus · Accepted Answer

To find out the national debt after the third year, we need to calculate the cumulative budget balance for the first three years:

First year: 10 - 7 = $3 surplus
Second year: 20 - 15 = $5 surplus
Third year: 30 - 25 - 5 = $0 balance (i.e., a $5 deficit)

Therefore, the government had a deficit of $5 in the third year. To find out the national debt after the third year, we need to add up the cumulative deficits (i.e., $10 + $20 + $5 = $35). However, the question asks for the debt after the third year, so we need to subtract the cumulative surpluses until the end of the third year (i.e., $3 + $5 = $8), which gives us a national debt of $27. Therefore, the correct answer is D: In the third year, it ran a $5 deficit, and its national debt after the third year is $25.

Suppose a New Country Is Formed, and Its Government Has