Crash Coarse Economics - Deficits and debts

What is the difference between a deficit and debt?

• A deficit is the accumulation of debts.

• A deficit occurs when the government's spending exceeds its tax revenue in a given year, while debt is the accumulation of those deficits.

• Debt is when the government spends more than its tax revenue in a given year.

• Debt and deficit are the same thing.

How is the national debt of Cliffordonia calculated at the end of its second year?

• $500

• $400

• $300

• $700

What does the US debt ceiling represent?

• The total amount of money the US owes to other countries.

• A cap on how much debt the US Treasury can issue.

• A limit on the annual budget deficit.

• A cap on how much the US can spend each year.

Which of the following is NOT a major concern for economists regarding US debt?

• The amount of money saved by consumers.

• The borrowing the US has already done.

• The potential for higher interest rates making debt repayment harder.

• The possibility of the US defaulting on its debt.

What are the two largest categories of federal spending?

• Infrastructure and defense

• Defense and education

• Healthcare and Social Security

• Education and healthcare

Why is looking at debt as a percent of GDP important?

• It shows the total amount of money a country owes.

• It reflects the government's spending habits.

• It helps compare the debt burden relative to the country's economic output.

• It indicates the country's ability to borrow more money.

What is a potential consequence of the government continuing to borrow money?

• Fewer loans available for businesses.

• A decrease in national debt.

• Increased savings for consumers.

• Lower interest rates on loans.

What scenario could lead to a country defaulting on its debt?

• The country's economy is growing rapidly.

• Savers and businesses might stop lending money or demand higher interest rates.

• The country has a low debt-to-GDP ratio.

• The country's debt is mostly in foreign currency.

What does the debt ceiling do?

• It cuts government spending.

• It raises government revenue.

• It reduces the national debt.

• It limits how much debt the US Treasury can issue.

What could potentially improve the long-run budget picture for the US?

• Raising taxes on all income levels.

• Increasing the debt ceiling.

• Slowing growth in healthcare costs.

• Borrowing more money.