Question

Suppose the government spends $500 billion during the fiscal year 2014 on goods and services. In addition, the government collects tax revenues of $480 billion and makes transfer payments equal to $150 billion. Assume the economy is producing at the potential output level. The budget balance for this economy is equal to _____ and the government is running a _____. Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices $170 billion; surplus -$170 billion; deficit $130 billion; surplus -$130 billion; deficit

Answer 1

170 billion ; deficit

Step-by-step explanation:

Given:

Amount spent by the government = $500 billion

Tax revenue collected = $480 billion

Transfer payments = $150 billion

Now,

The budget balance for government

= Tax revenue - Amount spent - Transfer payments

= $480 billion - $500 billion - $150 billion

= -170 billion

Here the negative sign depicts the deficit

Hence,

The answer is option 170 billion ; deficit