What is National Debt?

• A. Annual revenue
• B. The cash balance
• C. The total amount of money the government has borrowed.
• D. The national income

Answer: (C)

National Debt is the total amount of money the government has borrowed and not yet repaid. It accumulates over time as the government runs deficits—spending more than it takes in revenue—and borrows to cover the shortfall. The debt is a stock measure, representing all past borrowing that hasn’t been paid off, and it includes money owed to lenders both inside and outside the country.

This differs from annual revenue, which is the flow of money the government collects in a single year (taxes and other receipts). It also differs from the cash balance, which is the current amount of cash the government has on hand at a given moment. It is not national income (GDP), which is a measure of total income earned by the economy’s residents and firms over a period.