Question

Deferrals may be granted for a maximum period of ___ years.

A. 10
B. 3
C. 5
D. 7

Answer 1

After running a deficit for 10 years and accumulating $100 billion debt, a surplus of $1 billion over 5 years reduces it by $5 billion. With a balanced budget for the last 10 years, the government debt would stand at $95 billion.

Step-by-step explanation:

The question is asking about the amount of government debt accumulated under specific financial conditions over a 25-year period. Calculating this involves understanding deficits, surpluses, and balanced budgets:

For the first ten years, the government runs a deficit of $10 billion each year, which would total $100 billion in debt (10 years × $10 billion/year = $100 billion).

For the next five years, the government has a surplus of $1 billion each year, reducing the debt by $5 billion (5 years × $1 billion/year = $5 billion).

For the last ten years, the budget is balanced, meaning no additional debt is accrued.

Therefore, at the end of this period, the total government debt would be the initial debt of $100 billion minus the total surplus of $5 billion, resulting in $95 billion of government debt.