A new country has been in existence for only two years. In the first year, tax revenues were $1.0 million and outlays were $1.5 million. In the second year, tax revenues were $1.5 million and outlays were $2.0 million. At the end of the second year, the total government debt was
A) $0.5 million.
B) $1 million.
C) $2.5 million.
D) $3.5 million.

Question

Quizplus · Accepted Answer

The total government debt at the end of the second year is the sum of the deficits from both years. In the first year, the deficit was $0.5 million ($1.5 million outlays - $1.0 million revenues), and in the second year, it was $0.5 million ($2.0 million outlays - $1.5 million revenues). Adding these together gives a total debt of $1 million.

A New Country Has Been in Existence for Only Two