The US Treasury received $1 trillion in tax payments. It spent $850 billion on "current" goods and services plus transfer payments and interest on existing bonds. It spent $200 billion on capital projects (such as highways and medical research). Which of the following is correct?
a) It has a surplus of $150 billion but must issue $50 billion in new bonds
b) It has a deficit of $50 billion and must issue $50 billion in new bonds
c) It has a deficit of $50 billion and must issue $150 billion in new bonds
d) It has a surplus of $150 billion and can pay off $150 billion in existing bonds
Answer: b) It has a deficit of $50 billion and must issue $50 billion in new bonds
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