What is national debt?

Question

BlackTom AI · Accepted Answer

Question: What is national debt?
Options:
 a. A situation that arises when the government borrows money in one particular year to make welfare payments.
 b. The amount by which a government's spending exceeds its income over a particular period of time.
 c. A situation whereby the government is owed money by individuals who could not pay their taxes on time.
 d. The accumulated total of budget deficits over time.

Option a: This description speaks to a one-year borrowing episode for welfare payments. While borrowing in a given year can occur for various purposes, this option mischaracterizes national debt as a single-year event and ties it specifically to welfare payments, which is not the general definition of national debt. National debt encompasses the buildup across many years, not just a single year.

Option b: This sentence defines a budget deficit, which is the gap where spending exceeds revenue in a particular period. It is an important related concept, but it does not describe the total stock of government liabilities accumulated over time. Deficits contribute to debt, but the option itself describes the annual shortfall, not the accumulated debt.

Option c: This option describes a situation where the government is owed taxes by individuals. That would reflect tax arrears or unpaid taxes owed to the government, not the government's own debt. National debt is about outstanding liabilities of the government, not receivables from citizens.

Option d: This statement characterizes national debt as the accumulated total of budget deficits over time. It links the concept of deficits (shortfalls in a given period) to their aggregation into a cumulative liability that the government owes, which aligns with the standard definition of national debt as the stock of debt built up from past deficits and other accumulating liabilities.

Note on relationships: Deficits (option b) contribute to debt when each year's shortfall is financed by borrowing. However, the cumulative stock that results from repeatedly financing deficits over many years is what is referred to as the national debt, which is captured by option d. The other options describe related but distinct ideas (one-year borrowing for welfare, tax receivables, or general deficits) and do not encapsulate the full concept of national debt.

What is national debt?

View Explanation

Log in for full answers

Similar Questions