Analyze the relationship between the federal budget and national debt. Explain in a few sentences how a federal budget deficit and a federal budget surplus influence levels of national debt.
The federal budget is a plan for how the government will spend and receive money over a specific time period, usually a fiscal year. The national debt, on the other hand, is the total amount of money that the government owes to creditors.
When the government runs a budget deficit, it means that its expenses exceed its revenues. In order to make up for this shortfall, the government may borrow money, which adds to the national debt. Conversely, when the government runs a budget surplus, it means that its revenues exceed its expenses. In this case, the government can use the surplus to pay down existing debt, reducing the overall national debt.
Therefore, the relationship between the federal budget and national debt is that budget deficits tend to increase the national debt, while budget surpluses can help decrease the national debt. Over time, the pattern of deficits and surpluses can have a significant impact on the overall level of national debt.