Suppose the government's initial debt is 350 billion and that ...

[dmcintosh]

Suppose the government's initial debt is 350 billion and that during the next two years the government runs deficits of 90 and 40 billion.
 
  If during the third year the government has a 70 billion surplus, the government's total debt at the end of the three years will be
  A) 60 billion. B) 200 billion. C) 410 billion. D) 550 billion.

Question 2

If government increases spending and wants to maintain a balanced budget, it should
 
  A) increase taxes by an amount equal to the increase in spending multiplied by the tax multiplier.
  B) decrease taxes by an equal amount.
  C) increase taxes by an equal amount.
  D) decrease taxes by an amount equal to the increase in spending multiplied by the tax multiplier.

[lucas dlamini]

Answer to Question 1

C

Answer to Question 2

C