Suppose the Government's Initial Debt Is $350 Billion and That

question 58

Multiple Choice

Suppose the government's initial debt is $350 billion and that during the next two years the government runs deficits of $90 and $40 billion. If during the third year the government has a $70 billion surplus, the government's total debt at the end of the three years will be

• A) $60 billion.
• B) $200 billion.
• C) $410 billion.
• D) $550 billion.

---

Definitions:

Payments For Capital

Funds disbursed to acquire or maintain fixed assets, like equipment or buildings, or to compensate the providers of financial capital.

Interest

The charge for borrowing money, typically expressed as an annual percentage of the principal.

Credit

The trust which allows one party to provide resources to another party wherein the second party does not reimburse the first party immediately but promises to do so in the future.

Bonds

Fixed income investments representing a loan made by an investor to a borrower, typically corporate or governmental.