Federal Budget Deficits and the National Debt

Question 1

The government outlays are caused by transfer payments and approved expenditures to fund federal programs, whereas the government collects revenue through tax collection.

What happens when there is a budget deficit?

Answer 1

Discretionary fiscal policy leads to spending more than is collected through tax revenues.

Question 2

What effect do budget surpluses have in the national debt?

Answer 2

They help reduce the national debt

Question 3

What two problems congress faces when trying to determine the budget deficit

Answer 3

It can only protect a budget deficit, but not determine the actual budget deficit

The automatic stabilizers do not allow congress to accurately determine the budget deficit

Question 4

What tow things will happen if the government has to borrow funds to finance the increases in government spending?

Answer 4

Interest rates will increase, causing a decrease of private investment

The government will run a budget deficit