Answer the Question Using the Following Budget Information for a Hypothetical

question 3

Multiple Choice

Answer the question using the following budget information for a hypothetical economy.Assume that all budget surpluses are used to pay down the public debt. $\begin{array}{c}\begin{array}{lll}\\\\\text {Year 1}\\\text {Year 2}\\\text {Year 3}\\\text {Year 4}\\\text {Year 5}\\\text {Year 6}\end{array}\begin{array}{c}\text {Government}\\\underline{\text {Spending}}\\ \$ 450 \\500\\600\\640\\680\\600\end{array}\begin{array}{c}\\\underline{\text {Tax Revenues}}\\\$ 425 \\450 \\500 \\620 \\580 \\620\end{array}\begin{array}{c}\\\underline{\text { GDP }} \\ \$ 2,000 \\3,000 \\4,000 \\5,000 \\4,800 \\5,000\end{array}\end{array}$
Refer to the data.If year 1 is the first year of this nation's existence and year 6 is the present year,this nation's public debt is:

• A) $275 billion.
• B) $100 billion.
• C) $3,540 billion.
• D) $230 billion.

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Definitions:

Contract Rate

The agreed-upon rate specified in a contract for the provision of goods or services, often discussed in the context of interest rates or wages.

Market Rate

The prevailing interest rate available in the marketplace for securities or loans.

Journal Entry

A record in the accounting ledger that represents a transaction, including both the debit and credit side to maintain the accounting equation.

Bonds Payable

Bonds payable refers to the amount of money a company owes to bondholders and is recorded as a long-term liability on the company's balance sheet.