Suppose the government runs a budget surplus in a given year. It can reduce its overall federal debt by

Question

Quizplus · Accepted Answer

If the government runs a budget surplus, it means the government is taking in more revenue than it is spending. Therefore, it can use the surplus to buy back some of the bonds it sold to the public to finance previous deficits. This will reduce the overall federal debt. Option A is not relevant to reducing the debt. Option C is possible, but the government cannot directly control net exports. Option D may increase revenue, but it may not necessarily lead to a reduction in the overall federal debt.

Suppose the Government Runs a Budget Surplus in a Given