The Mother Of Economy Practice Test

What is government debt?

The money in circulation The money owed by the central government The annual budget deficit The outstanding debt of the central government

Correct Answer:

The outstanding debt of the central government

Explanation:

Government debt is the stock of obligations the government has outstanding at a given time. It represents money the government has promised to repay in the future, built up as deficits were financed by borrowing. This makes it a stock concept—current liabilities that can rise with new borrowing or fall with repayments. The amount in circulation is currency, not debt. The annual budget deficit is a flow—the shortfall in a single year, not the total liabilities carried over time. Saying money owed by the central government is close but vague; describing it as the outstanding debt emphasizes the current, actual liabilities that are owed to lenders. So the best description is the outstanding debt of the central government.

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