The budget deficit is calculated as the difference between government spending and tax revenues. Mathematically, it is expressed as:
Budget Deficit = Government Spending - Tax Revenues
Let's calculate the budget deficit for each year based on the provided data:
1. Year 1:
Budget Deficit = $800 - $825 = -$25 billion
2.Year 2:
Budget Deficit = $850 - $850 = $0 billion
3.Year 3:
Budget Deficit = $900 - $875 = $25 billion
4. Year 4:
Budget Deficit = $950 - $900 = $50 billion
5.Year 5:
Budget Deficit = $1,000 - $925 = $75 billion
So, the budget deficit was $75 billion in Year 5.
Complete Question
The following is budget information for a hypothetical economy. All data are in billions of dollars.
Refer to the table. The budget deficit was $75 billion in:
Government Spending Tax Revenues GDP
Year 1 $800 $825 $4,000
Year 2 $850 $850 $4,200
Year 3 $900 $875 $4,350
Year 4 $950 $900 $4,500
Year 5 $1,000 $925 $4,600