Question

line graph with percent of gdp on the y axis, and years on the x axis. the line graph increases from approximately 64% to 65% from 1995 to 1996. the line graph steadily decreases from 1996 to 200. the line graph increases from mid 2000 to early 2001, then decreases from mid 2001 until late 2001. the line graph increases from late 2001 until 2008 when the graph ends.

according to the graph above, during which of the following time periods did the federal government likely run a budget surplus?

2006-2008
1995-1996
2001-2003
1997-1999

Explanation:

Identify the variable on the y-axis

Using the Data Analysis knowledge point
The text description indicates that the line graph represents a percentage of GDP over time. In the context of U.S. federal finance, a line graph showing values around \(64\%\) to \(65\%\) that decreases steadily from 1996 to 2000 represents the Federal Debt Held by the Public as a percentage of GDP.

Relate the trend to a budget surplus

Using the Data Analysis knowledge point
A federal budget surplus occurs when government revenues exceed expenditures. When the government runs a surplus, it pays down outstanding public debt, causing the total debt (and thus debt as a percentage of GDP) to decrease. Conversely, a budget deficit increases the debt.

Analyze the time periods

Using the Data Analysis knowledge point

• 1995-1996: The graph increases from \(64\%\) to \(65\%\) (deficit).
• 1997-1999: The graph steadily decreases from 1996 through 2000 (surplus).
• 2001-2003: The graph increases (deficit).
• 2006-2008: The graph increases (deficit).

Determine the correct option

Using the Data Analysis knowledge point
The period of steady decline in the debt-to-GDP ratio corresponds to the late 1990s, specifically 1997-1999, when the U.S. federal government ran budget surpluses.

Answer:

• (A) 2006-2008
• (B) 1995-1996
• (C) 2001-2003
• (D) 1997-1999 (Correct answer)