Question

Utopia has a national debt. If they have a budget deficit this year, and continue to operate with budget deficits year after year, what will happen to their national debt?A. Their national debt will decrease.

B. Their national debt will increase.
C. Their national debt will remain the same.
D. They will now have a budget surplus.

Answer 1

Answer: B. Their national debt will increase.

Step-by-step explanation:

A country has a budget deficit when it spends more than it receives from its revenue sources i.e taxes.

If a country has a budget deficit, it will have to borrow money in order to pay for this shortfall so that it may be able to carry out the expenditure it is supposed to.

If therefore, a country keeps operating in deficit, it will have to keep borrowing to keep spending which means that the national debt will keep increasing.