Question

What is the difference between the federal budget deficit and the national debt?

a. The budget deficit is the amount by which expenditures exceed revenues in a particular year, while the national debt is the cumulative effect of all past budget deficits and surpluses.

b. The national debt includes all outstanding bonds, while the budget deficit excludes bonds held by government agencies.

c. The budget deficit is the cumulative effect of all prior national debts.

d. There is no difference between the budget deficit and the national debt.

Answer 1

Option A.

• A federal budget deficit is said to occur when the government falls short of revenue when it's spends more than it receives.
• While a national debt is said to occur when a nation has accumulated all the deficits over the past years.
• Hence we can define the budget deficit as the amount by which expenditures exceed revenues in a particular year while the national debt is the sum of all past budget deficits and surpluses.