If government revenues in 2011 were $2.2 trillion and government outlays were $3.8 trillion, the federal: choose one:
a. debt increased $1.6 trillion.
b. budget was balanced.
c. debt decreased $1.6 trillion.
d. debt was unaffected in that year.
e. budget surplus was $1.6 trillion.

The correct answer is A) Debt increased by $1.6 trillion

Explanation:

To find whether the government has a surplus or a deficit, we use this simple formula:

Govt surplus/deficit = G-T

where G = government outlays, and T= government revenue or taxes.

Now, we simply replace the terms

Because in this equation G > T, the government is in deficit, the deficit equals $1.6 billion, and will have to be financed by issuing debt. Hence, debt will increase by the same amount.

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