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Answer :
Final answer:
To calculate the government debt after a series of deficits and surpluses, compute the sum of the deficits and surpluses over time. In the given scenario, after running a deficit for ten years and a surplus for five years, with a balanced budget afterwards, the government debt would be $95 billion.
Explanation:
The government budget balance involves calculating whether the government has a surplus or a deficit by comparing its revenues to its expenditures.
If a government runs a budget deficit of $10 billion dollars each year for ten years, that would result in a deficit of 10 billion x 10 years = $100 billion. Then, if the government runs a surplus of $1 billion each for five years, it would decrease the debt by 1 billion x 5 years = $5 billion. If we then add a period of ten years with a balanced budget, where the government neither runs a surplus nor a deficit, the total government debt would not change during this period. Hence, the government debt would be the total after the first ten years minus the total surplus from the following five years, which is $100 billion - $5 billion = $95 billion.
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