the government of coruscant currently has a balanced budget. there is a national debt of $500 million which…

the government of coruscant currently has a balanced budget. there is a national debt of $500 million which incurs 10% interest each year, but interest payments on the national debt are not currently included in the national budget. which of the following will be necessary to reduce the size of the national debt? choose 1 answer: a reduce transfer payments by $50 million b maintain a balanced budget c increase tax revenues by $50 million d generate a surplus of more than $50 million e reduce government spending by $50 million

the government of coruscant currently has a balanced budget. there is a national debt of $500 million which incurs 10% interest each year, but interest payments on the national debt are not currently included in the national budget. which of the following will be necessary to reduce the size of the national debt? choose 1 answer: a reduce transfer payments by $50 million b maintain a balanced budget c increase tax revenues by $50 million d generate a surplus of more than $50 million e reduce government spending by $50 million

Answer

Brief Explanations:

The national debt is $500$ million with a $10%$ annual interest, so the annual interest payment is $500\times0.1 = 50$ million. To reduce the debt, the government needs to have enough surplus to pay off the interest and start reducing the principal. A surplus of more than $50$ million would allow for debt - reduction after covering the interest expense.

Answer:

D. Generate a surplus of more than $50$ million