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

Budget deficits add to national debt, while budget surpluses reduce it. With debt starting at zero, we simply accumulate each year’s deficit (government spending − tax revenue) to get the end‑2017 national debt.

1) Relevant concepts
- Annual budget balance = Government spending − Tax revenue.
- If balance > 0 it is a deficit (adds to debt). If balance < 0 it is a surplus (reduces debt).
- National debt at the end of a year = previous debt + that year’s deficit (or − surplus).

2) Complete reasoning process (step by step)
Start with national debt at end‑2014 = $0 (given). Compute each year’s balance and update debt.

3) Calculations with intermediate steps
- 2015: spending $900b, revenue $750b → deficit = 900 − 750 = $150b.
  Debt end‑2015 = 0 + 150 = $150b.
- 2016: spending $750b, revenue $850b → balance = 750 − 850 = −$100b (a $100b surplus).
  Debt end‑2016 = previous 150 + (−100) = 150 − 100 = $50b.
- 2017: spending $800b, revenue $600b → deficit = 800 − 600 = $200b.
  Debt end‑2017 = previous 50 + 200 = $250b.

4) Why the correct answer is correct
The net accumulation of deficits and surpluses over 2015–2017 yields $250 billion of outstanding debt by end‑2017. Each year’s surplus or deficit directly changes the stock of debt; the arithmetic above shows the final stock is $250b.

5) Why the other options are incorrect
- (a) $150b: equals only the 2015 deficit, ignoring subsequent surplus in 2016 and deficit in 2017.
- (b) “There is no national debt”: incorrect because net deficits over the period produce a positive debt.
- (d) $100b: does not match the correct cumulative arithmetic (it understates the final stock).

6) Conclusion / confirmation
The national debt at the end of 2017 is $250 billion, matching choice c.

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