Question

Identify the correct statement. Select one: a. Debt increases when the budget deficit decreases. b. A budget deficit is a stock variable, while debt is a flow variable. c. A budget deficit is a flow variable, while debt is a stock variable. d. A budget deficit and debt are both stock variables. e. The budget deficit decreases when aggregate demand decreases.

Answer 1

c

Step-by-step explanation:

A flow variable is a variable that is measured over a period in time

A stock variable is a variable that is measured at a point in time.

Budget deficit occurs when government spending exceeds income of the government.

Debt is the total amount owed by an entity

Budget deficit is a flow variable because it increases as debt increases Debt is measured at a point in time. It is a stock variable

When budget deficit increases, debt increases. This is because a deficit would need to be funded by additional borrowing