Question

The cyclical surplus is $450 billion, potential output is $10 trillion and tax rate is 15 percent. With this information, we can infer that the actual output of this economy is:________.

Answer 1

$13 trillion.

Step-by-step explanation:

The actual output of economy can be calculated using the following mentioned formula:

Cyclical deficit=tax rate in question(potential output - actual output)

-$450 billion=0.15($10 trillion-actual output)

-$450 billion=$1.5 trillion-0.15*actual output

0.15*actual output=$1.5 trillion+$450 billion

0.15*actual output=$1.95 trillion

Actual output=$13 trillion.