Exam 14: Deficit Spending and the Public Debt

In the long run, a higher government deficit does not affect equilibrium real Gross Domestic Product (GDP), so that continuous increases in the government deficit will

An increase in the public debt would most likely indicate that

A government budget deficit occurs during a budget year when

A government budget surplus occurs during a budget year when

Suppose that the federal government had a budget deficit of $80 billion in year 1 and $90 billion in year 2, but that it experiences budget surpluses of $40 billion in year 3 and $20 billion in year 4. Also assume that the government uses any budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have