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

Cumulative deficits determine national debt, so we add yearly deficits and subtract surpluses starting from the initial debt.

1) Relevant knowledge points and concepts
- National debt at the end of a period equals the previous debt plus the budget deficit (or minus the budget surplus) for the current period.
- A deficit = Government spending − Tax revenue (if positive). A surplus = Tax revenue − Government spending (if revenue exceeds spending).
- Given debt is zero at end‑2014, accumulate each year's net borrowing to end‑2017.

2) Complete reasoning process step by step
- Compute the budget outcome (deficit or surplus) for each year, then update the cumulative debt year by year.

3) Calculations with intermediate steps
- 2015: Spending = $900 billion, Revenue = $750 billion.
  Deficit2015 = 900 − 750 = $150 billion.
  Debt at end‑2015 = 0 + 150 = $150 billion.
- 2016: Spending = $750 billion, Revenue = $850 billion.
  Surplus2016 = 850 − 750 = $100 billion (a surplus reduces debt).
  Debt at end‑2016 = 150 − 100 = $50 billion.
- 2017: Spending = $800 billion, Revenue = $600 billion.
  Deficit2017 = 800 − 600 = $200 billion.
  Debt at end‑2017 = 50 + 200 = $250 billion.

4) Why the correct answer is correct
- The national debt equals the cumulative net borrowing across the three years. After adding the 2015 deficit, subtracting the 2016 surplus, and adding the 2017 deficit, the final cumulative debt is $250 billion.

5) Why the other options are incorrect
- a. $100 billion: This ignores either the 2016 surplus or miscalculates the net accumulation (not the correct cumulative total).
- b. There is no national debt: Incorrect because the net result over the period is a positive cumulative deficit ($250 billion), not zero.
- d. $150 billion: This equals only the 2015 deficit and ignores the subsequent surplus in 2016 and deficit in 2017.

6) Conclusion confirming the final answer
- The correct national debt at the end of 2017 is $250 billion, which matches the provided answer.

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