What distinguishes national debt from a budget deficit?

The distinction that national debt is the total money owed, while a budget deficit represents the annual overspending is clear and foundational to understanding fiscal policy. National debt accumulates over time as governments borrow money to cover shortfalls, consisting of the total outstanding liabilities incurred from all past budget deficits. This can include a variety of borrowed funds from both domestic and international sources.

On the other hand, a budget deficit occurs within a specific annual timeframe when a government's expenditures exceed its revenues. Each year, the budget can result in a surplus, a balance, or a deficit, depending on the financial management of the country. If a government consistently spends more than it earns, the annual deficits add to the national debt, but each year’s budget plays a critical role in determining the fiscal health and policies of that nation.

While the other choices introduce interesting concepts—such as the duration of time over which debt is incurred, the nature of borrowing, or the static versus dynamic nature of financial figures—they do not accurately capture the core definitions and relationship between national debt and budget deficits as effectively as the chosen answer does. National debt encapsulates a cumulative total while a budget deficit marks a specific annual occurrence of overspending.