The Federal Deficit Nearly Tripled

EconEye Admin

3 years ago

The federal government’s deficit nearly tripled in the first nine months of the fiscal year. Tax revenues decreased by 11% and government spending jumped 10%. Interest payments reached $652 billion—25% more than during the same period a year ago. The deficit adds to an already large federal debt.—npr.org

Answer the following questions to check your understanding of the story.

Why is the federal government deficit growing?

The federal government deficit is growing because _____________.

a) government spending and debt interest are increasing, but the decrease in tax revenues is making the deficit smaller than it would otherwise be

b) tax revenues are decreasing and debt interest is increasing, but the increase in government spending is making the deficit smaller than it would otherwise be

c) tax revenues are decreasing, and government spending and debt interest are increasing

d) tax revenues are decreasing and government spending is increasing, but the increase in debt interest is making the deficit smaller than it would otherwise be

Wrong! - The government budget balance is a deficit when outlays exceed receipts. Is government spending an outlay or a receipt? Are interest payments on the debt an outlay or a receipt? Are tax revenues an outlay or a receipt?

Well Done! - The government budget balance is a deficit when outlays exceed receipts. When government spending and interest payments on the debt increase and tax revenues decrease, the difference between outlays and receipts increases and the deficit grows.

By how much does the federal debt grow each year?

The federal debt grows by an amount equal to _____________.

a) federal government spending

b) the federal government budget deficit

c) the debt interest

d) federal government spending plus debt interest minus tax revenues

Wrong! - How is the federal government debt calculated?

Correct! - The federal government debt is the sum of past federal budget deficits minus the sum of past federal budget surpluses. Each year, the federal debt grows by an amount equal to the federal government budget deficit.

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