Final answer:
A national debt increases when a country has a budget deficit, as the government has to borrow money to cover the gap between expenditures and revenues.
Step-by-step explanation:
The national debt increases in a given year when a country experiences a budget deficit. A budget deficit occurs when the government's expenditures exceed its revenues within a fiscal year. When this happens, the government borrows money, often by selling Treasury bonds, notes, and bills, to cover the shortfall, which in turn adds to the national debt.
In contrast, a budget surplus happens when the government has more revenue coming in than expenses going out. In this scenario, the surplus could be used to pay down the national debt. With a balanced budget, revenues and expenditures are equal, which means that it neither contributes to an increase nor a decrease in the national debt.
It's important to note that just because a country runs a deficit does not necessarily mean it will face negative economic consequences. If the percentage increase in the national debt is smaller than the percentage growth of the GDP, the debt to GDP ratio could still fall, signaling a healthy economy.