Government Budget Deficits Increase National Debt

Steps:

• Define budget surplus as government revenues exceeding expenditures, and deficit as expenditures exceeding revenues.
• Recognize that deficits require borrowing, adding to national debt.
• Evaluate each option against fiscal policy definitions.
• Select the option that directly links deficits to debt accumulation.

Why D is correct:

• A deficit means the government borrows to cover excess spending, directly increasing the national debt by the deficit amount.

Why the others are wrong:

• A: Budget surplus relates to fiscal balance, not balance of payments, which tracks international transactions.
• B: Surplus means revenues exceed spending, the opposite of spending too much.
• C: Deficits can occur during economic growth via expansionary policy, not just decline.

Final answer: D