Question

ECONOMICS

In which situation does the national debt decrease?

A. The federal government has a balanced budget.

B. The federal government has a decrease in the federal deficit from the previous fiscal year but still has a deficit

C. The federal government hwd a surplus in the budget

D. The federal government has an increase in the federal deficit from the previous fiscal year

Answer 1

Answer:

To reduce the debt, the country could raise taxes and/or cut spending. These are two of the tools of contractionary fiscal policy, and either tactic could slow economic growth.

Explanation:

Answer 2

When the federal government has a decrease in the national debt from the previous fiscal year, it implies a situation where the national debt decreases.

How does the government reduce the national debt?

There are several strategies used, one of the most common being the issuance of debt in the form of bonds so that the government can raise funds, and may adopt a policy of repurchasing the bonds if necessary, such as the "Quantitative Easing" policy in the US.

Therefore, in order to reduce the national debt, the government must stimulate the economy and identify strategies for raising money.

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