Consider the government's budget constraint.The accumulated stock of government debt will begin to fall

Question

Quizplus · Accepted Answer

When the government's annual budget is in surplus, it means that the government is collecting more revenue than it is spending. This surplus can be used to pay down the debt, resulting in a decrease in the accumulated stock of government debt. Conversely, when the government's annual budget is in deficit, the government is spending more than it is collecting in revenue, leading to an increase in the accumulated stock of government debt. Therefore, the accumulated stock of government debt can only fall when the government's annual budget is in surplus.

Consider the Government's Budget Constraint