Question

If the federal government has a budget surplus in a given year, the national debt will:_______.a. decrease. b. remain constant. c. increase only if output is below potential output. d. increase.

Answer 1

a. decrease.

Step-by-step explanation:

If the federal government has a budget surplus in a given year, the national debt will decrease.

If a government has a budget surplus, it implies that the government after carrying out its financial obligations still has extra funds. These extra funds are mostly used by governments to pay off debts thus the national debt will increase. Countries like Belarus, South Korea experience budget surplus.