Thank you for visiting A government begins the year with 6 trillion of public debt During the year it collects taxes of 4 trillion and spends 7 trillion on. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
The government's debt increases by the amount of the deficit it runs, which in this case is $3 trillion due to spending $7 trillion and earning $4 trillion in taxes, resulting in a total debt increase of $3 trillion for the year. Thus, the correct answer is a. $3 trillion increase.
To calculate the change in the government's debt, we need to look at the government's budget, which includes its revenue from taxes and its spending on various items. The government's initial debt is $6 trillion. Throughout the year, the government collects $4 trillion in taxes but it spends $7 trillion on various things. This means the government runs a deficit because it is spending $3 trillion more than it collects in taxes ($7 trillion - $4 trillion = $3 trillion).
To finance this deficit, the government issues new debt worth $3 trillion. This new debt issuance directly adds to the government's existing debt. Therefore, at the end of the year, the government's total debt will have increased by the amount of new debt it has taken on, which is $3 trillion.
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