Consider the following data for a country called Monashland. [table]
Year | Government spending | Tax Revenue 2015 | $900 billion | $750 billion 2016 | $750 billion | $850 billion 2017 | $800 billion | $600 billion
[/table] Assume national debt was zero at the end of 2014. What is the national debt for Monashland at the end of 2017?

Question

BlackTom AI · Accepted Answer

National debt equals the cumulative sum of past budget deficits (government spending minus tax revenue). A budget surplus (tax revenue > spending) reduces existing debt; a deficit (spending > revenue) increases it.

1) Relevant knowledge points and concepts
- Annual deficit = Government spending − Tax revenue (positive if a deficit, negative if a surplus).
- National debt at end of year = previous debt + that year’s deficit.
- Starting condition: national debt = $0 at end of 2014.

2) Step-by-step reasoning and calculations
- 2015: Government spending = $900 billion, Tax revenue = $750 billion.
  Deficit2015 = 900 − 750 = $150 billion.
  Debt end-2015 = 0 + 150 = $150 billion.
- 2016: Spending = $750 billion, Revenue = $850 billion.
  Deficit2016 = 750 − 850 = −$100 billion (this is a surplus of $100 billion).
  Debt end-2016 = 150 + (−100) = 150 − 100 = $50 billion.
- 2017: Spending = $800 billion, Revenue = $600 billion.
  Deficit2017 = 800 − 600 = $200 billion.
  Debt end-2017 = 50 + 200 = $250 billion.

3) Intermediate steps shown above include each year’s deficit/surplus and running debt total.

4) Why the correct answer is correct
The correct answer follows the accumulation rule: the 2015 deficit raises debt to $150b, the 2016 surplus lowers it to $50b, and the 2017 deficit adds $200b to reach $250b. Summing year-by-year deficits (150 − 100 + 200) also yields +250.

5) Why the other options are incorrect
- a. $150 billion: equals only the 2015 deficit, ignoring subsequent 2016 surplus and 2017 deficit.
- c. $100 billion: does not match the cumulative sum; likely an arithmetic mistake.
- d. There is no national debt: incorrect because net deficits across the three years total a positive $250 billion.

6) Conclusion/confirmation
The national debt for Monashland at the end of 2017 is $250 billion, matching answer b.

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