The Difference Between the Federal Budget Deficit and the National

question 10

Multiple Choice

The difference between the federal budget deficit and the national debt is that the

• A)deficit is a stock and the debt is a flow
• B)deficit is a flow and the debt is a stock
• C)debt includes interest payments and the deficit does not
• D)deficit can be positive but the debt cannot
• E)debt can be negative but the deficit cannot

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Definitions:

Expected Value

The weighted average of all possible values of a random variable, with weights being their respective probabilities.

Probability

A measure quantifying the likelihood of a specific event occurring, often expressed as a number between 0 and 1.

Von Neumann-Morgenstern Utility Function

A utility function that assumes individuals can rank their preferences under uncertainty, used in expected utility theory to describe choices.

Insurance

A financial product that provides protection against financial loss or harm, in exchange for the payment of a premium.