5.3 Government Deficits and National Debt

• What is a government deficit?

  Spending exceeds revenue
• Match the concept with its definition:

  Government Deficits ↔️ Excess of spending over revenue

  National Debt ↔️ Total money owed by the government
• National debt accumulates from past government deficits
• What is debt held by government entities called?

  Bonds held by government entities
• What does a government deficit represent in summary?

  Shortfall between spending and revenue
• What is a primary driver of increasing national debt?

  Government deficits
• What is a primary driver of national debt growth?

  Government deficits
• Demographic changes, such as increased healthcare costs, can widen deficits.


  True
• What is the definition of government deficits?

  Spending exceeds revenue
• What is the source of national debt accumulation?

  Government deficits
• What are two impacts of national debt on a country?

  Financial stability and fiscal policy
• Unexpected events, such as natural disasters, can lead to government deficits.

  True
• How do demographic changes affect national debt?

  Increased social spending
• What is the crowding out effect caused by government borrowing?

  Reduced private investment
• Match the effect of large deficits with its impact:

  Higher Interest Rates ↔️ Reduced Investment

  Reduced Economic Growth ↔️ Slower Expansion

  Debt Sustainability Concerns ↔️ Higher Borrowing Costs
• A government deficit adds to the national debt.

  True
• Government deficits increase the national debt over time.


  True
• National debt is a significant economic indicator for a country's financial stability.


  True
• Arrange the steps to distinguish between government deficits and national debt:

  1️⃣ Define government deficits

  2️⃣ Define national debt

  3️⃣ Compare definitions

  4️⃣ Identify differences
• Match the source of deficits with its description:

  Increased government spending ↔️ Higher expenditures without matching revenue

  Reduced tax revenue ↔️ Lower income due to economic factors

  Interest payments on debt ↔️ Cost of servicing existing debt

  Unexpected events ↔️ Unplanned spending on emergencies
• High interest rates on existing debt increase the cost of servicing it.


  True
• How do high interest rates affect national debt?

  Increase cost of debt
• A government deficit typically refers to a fiscal year
• How is a government deficit measured?

  Difference between spending and revenue
• What type of bonds are included in the national debt?

  Government bonds
• National debt accumulates from past government deficits financed by borrowing through the sale of government bonds
• National debt is the total accumulated borrowing from past deficits.


  True
• Slow economic growth can lead to larger deficits because government revenue from taxes may not keep pace with spending
• When economic growth is slow, government revenue may not keep up with spending commitments, leading to larger deficits
• How do recessions impact government deficits?

  Reduce tax revenue
• Government deficits add to the national debt.


  True
• National debt is financed by borrowing through the sale of bonds
• Government deficits represent the shortfall between spending and revenue in a given year
• What is a primary driver of national debt growth?

  Government deficits
• Recessions reduce tax revenue and increase social spending, expanding deficits
• The crowding out effect slows economic growth by reducing capital available for businesses.


  True
• What is the primary concern with very high debt levels relative to GDP?

  Debt sustainability
• Match the cause with its impact on national debt:

  Government Deficits ↔️ Primary driver of debt growth

  Slow Economic Growth ↔️ Leads to larger deficits

  High Interest Rates ↔️ Increase cost of servicing debt
• Match the concept with its description:

  Government Deficits ↔️ Excess spending over revenue

  National Debt ↔️ Total money owed by government
• Bonds held by government entities are a component of national debt.


  True