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

Question

Quizplus · Accepted Answer

The federal government had deficits totaling $90 billion in years 1 and 2 ($40 billion + $50 billion) and surpluses totaling $70 billion in years 3 and 4 ($20 billion + $50 billion). Using the surpluses to pay down the debt would reduce the total increase in public debt to $20 billion ($90 billion - $70 billion).

Suppose the Federal Government Had Budget Deﬁcits of $40 Billion