Which of the following is true about the relationship between the federal budget deficit and the federal debt?
A)Whenever a country has a positive amount of federal debt, it must run a federal budget deficit in that year.
B)As discussed in the textbook, the federal budget deficit represents a real variable, while the federal debt represents a nominal variable.
C)As discussed in the textbook, the federal budget deficit represents a flow variable, while the federal debt represents a stock variable.
D)All of the above are true.
E)None of the above are true.

Question

Quizplus · Accepted Answer

The federal budget deficit is the amount by which government spending exceeds revenue in a given year, which represents a flow variable. The federal debt, on the other hand, is the total amount of money the government owes to its creditors from past borrowing. This represents a stock variable, as it is the accumulation of past deficits and surpluses. Choice A is incorrect because a country with a positive federal debt may also have a surplus in a given year. Choice B is incorrect because the federal deficit and debt are both nominal variables, as they are measured in dollars without adjusting for inflation.

Which of the Following Is True About the Relationship Between