Suppose that the federal government had a budget deficit of $80 billion in year 1 and $90 billion in year 2, but that it experiences budget surpluses of $40 billion in year 3 and $20 billion in year 4. Also assume that the government uses any budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have
A)decreased by $110 billion.
B)increased by $230 billion.
C)increased by $110 billion.
D)decreased by $57.5 billion.

Question

Quizplus · Accepted Answer

The total deficit over the first two years is $170 billion ($80 billion + $90 billion). The total surplus over the next two years is $60 billion ($40 billion + $20 billion). Therefore, the net increase in public debt is $110 billion ($170 billion - $60 billion).

Suppose That the Federal Government Had a Budget Deficit of $80