5. Which of the following statements is true regarding the national debt and fed

Question

5. Which of the following statements is true regarding the national debt and federal government? deficits?

A. There is a positive relationship between the federal government budget surplus and a federal government budget deficit.

B. There is a positive relationship between the amount of borrowing and a federal government surplus.

C. There is a positive relationship between the national debt and a federal government budget deficit.

D. There is a positive relationship between the national debt and a federal government budget surplus

Explanation / Answer

Answer : Option C. There is a positive relationship between the national debt and federal government budget deficit.

Explanation: It may be argued that the outcomes resulting from a higher national debt are the same as the ourcomes resulting from a higher budget deficit. This is because of the fact that a higher deficit produce a higher national debt.

Government deficit is the gap between what the government spends and what it receives (in terms of taxes and other receipts). National debt can be defined as the debt resulting from the borrowings of the federal government to cover years and years of budget deficits of the country. Thus higher the deficit higher will be the national debt.

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