Question

GDP=100,000, taxes=$22,000; government purchases=$25,000; national saving =$15,000.

This economy's government is running a"

a) Budget surplus
b) Budget deficit
c) Balanced budget
d) National debt

Answer 1

In this scenario, the government is running a budget deficit because its government purchases of $25,000 exceed its tax revenue of $22,000 by $3,000. The correct option is b.

Step-by-step explanation:

Using the provided data with GDP of $100,000, taxes at $22,000, government purchases at $25,000, and national saving at $15,000, we can determine the fiscal condition of this country's government. A government runs a budget deficit when it spends more than what it collects in taxes. In this scenario, the government spending (government purchases) is $25,000, which is higher than the tax revenue of $22,000. Thus, the difference of $3,000 ($25,000 - $22,000) represents the amount by which government expenses exceed its tax revenue, indicating a budget deficit.

In this case, the government is running a budget deficit.

To determine this, we need to compare government purchases with taxes. If government purchases exceed taxes, then there is a budget deficit. In this case, government purchases are $25,000 and taxes are $22,000, so there is a budget deficit of $3,000.

A budget surplus would occur if taxes exceed government purchases, while a balanced budget would occur if taxes are equal to government purchases.