AP Macroeconomics : How to find deficit spending

Study concepts, example questions & explanations for AP Macroeconomics

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Example Questions

Example Question #1 : Deficit Spending

At the beginning of a specified fiscal year, the national debt is equal to $1000. At the end of the fiscal year, the national deficit is equal to $100. The national debt at the end of the fiscal year is equal to ________.

Possible Answers:





Correct answer:



The national debt is the accumulation of national deficits, tabulated every fiscal year.

Therefore, if the national debt at the beginning of the year is $1000 and the deficit for that year is $100, the accumulated nation deficit is $1000+$100=$1100.

If you selected $900, you may have subtracted the deficit that year rather than adding it.

If you selected $100, you may have mistaken the national deficit for the national debt.

If you selected $1000, you may have forgotten to include the new deficit of $100 into the calculation of national debt.

Example Question #2 : Deficit Spending

The British economist who notably advocated deficit spending in order to pull a nation out of a recession or depression is _________.

Possible Answers:

John Maynard Keynes

Carl Menger

Adam Smith

Alfred Marshall

William Stanley Jevens

Correct answer:

John Maynard Keynes


John Maynard Keynes began arguing forcefully in the 1920s that spending in a deficit would actually help a country get out of an economic depression. The Great Depression of the 1930s saw many governments put Keynes' theories to the test, often with economic success. This time period is often known as the Keynesian Revolution.

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