Question : What is the difference between a deficit and a debt?
Option 1: A deficit is the amount by which spending exceeds revenue in a given year, while a debt is the total amount of money owed by the government
Option 2: A deficit is the total amount of money owed by the government, while a debt is the amount by which spending exceeds revenue in a given year
Option 3: A deficit is the amount of money owed to foreign countries, while a debt is the amount of money owed to domestic lenders
Option 4: A deficit is the amount of money owed to domestic lenders, while a debt is the amount of money owed to foreign countries
Correct Answer: A deficit is the amount by which spending exceeds revenue in a given year, while a debt is the total amount of money owed by the government
Solution : The correct answer is (a) A deficit is the amount by which spending exceeds revenue in a given year, while a debt is the total amount of money owed by the government.
A deficit and a debt are both financial terms related to government finances, but they represent different aspects of the government's fiscal situation.
A deficit refers to the amount by which a government's spending exceeds its revenue in a given fiscal year. It indicates that the government is spending more money than it is receiving through taxes and other sources of revenue. A deficit is typically covered by borrowing money, issuing bonds, or using other means of financing.
On the other hand, the debt (also known as the national debt or public debt) represents the cumulative total amount of money that the government owes to various lenders and entities. It is the accumulation of past deficits and is the result of ongoing borrowing to cover deficits. The debt includes the outstanding balances of government-issued bonds, Treasury bills, and other financial obligations.
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