Suppose the federal government had budget surpluses of $80 billion in year 1 and $120 billion in year 2 but had budget deficits of $10 billion in year 3 and $40 billion in year 4. Also assume that it used its budget surpluses to pay down the public debt. At the end of these four years, the federal government's public debt would have:

decreased by $150 billion.

decreased by $200 billion.

increased by $150 billion.

increased by $50 billion.

decreased by $150 billion

Explanation:

Given that

Year 1 = + 80 billion

Year 2 = + 120 billion

Year 3 = - 10 billion

Year 4 = - 40 billion

Where

+ and - represents surplus and deficits respectively

Therefore,

Net budget surplus = 80 + 120 - 10 - 40

= 200 - 50

= $150 billion

In the question, it was assumed the budget surplus was used in paying down public debt, thus

Public debt decreased by $150billion

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