Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
How does the federal government aquire debt?
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Step 1
Introduction
Deficit and Debt
If the federal revenues and the government spending are equal in a Fiscal year, then it is said that government has Balanced Budget. When Revenues are more than spending then it is called Surplus Budget. When spending is greater than Revenues collected by way of tax etc it is called Deficit Budget. To offset the deficit, the government needs to borrow money. Deficit is related to single year whereas debt (National Debt) is the sum of all past deficits Less the amounts that the federal government has since repaid. Every year the federal government pays interest on National Debt as part of its overall spending.
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