Federal Deficits and the National Debt

Critical Thinking Questions

In a booming economy, is the federal government more likely to run surpluses or deficits? What are the various factors at play?

Economist Arthur Laffer famously pointed out that, in some cases, income tax revenue can actually go up when tax rates go down. Why might this be the case?

Is it possible for a nation to run budget deficits and still have its debt/GDP ratio fall? Explain your answer. Is it possible for a nation to run budget surpluses and still have its debt/GDP ratio rise? Explain your answer.