Suppose that the federal government had a budget deficit of $80 billion in year 1 and $10 billion in year 2, but it had budget surpluses of $140 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 $70 billion.
B) increased by $250 billion.
C) increased by $70 billion.
D) decreased by $62.5 billion.

Question

Quizplus · Accepted Answer

The government had deficits totaling $90 billion ($80 billion + $10 billion) in years 1 and 2, and surpluses totaling $160 billion ($140 billion + $20 billion) in years 3 and 4. Using surpluses to pay down the debt, the net effect is a decrease in public debt by $70 billion ($160 billion - $90 billion).

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