You have some estimates of national accounts numbers for a closed economy for the coming year.Under one set of expectations,government purchases will be $30 billion,transfer payments will be $10 billion,and taxes will be $45 billion.Under another set of expectations,GDP will be $200 billion,taxes will be $50 billion,transfer payments will be $20 billion,consumption will be $120 million,and investment will be $40 billion.Based on these numbers in the first case there should be a
A)$15 billion surplus,and in the second case a $10 billion surplus.
B)$15 billion surplus,and in the second case a $30 billion deficit.
C)$5 billion surplus,and in the second case a $10 billion deficit.
D)$5 billion surplus,and in the second case a $30 billion deficit.

Question

Quizplus · Accepted Answer

In the first case, the budget surplus is calculated as Taxes ($45 billion) - Government Purchases ($30 billion) - Transfer Payments ($10 billion) = $5 billion surplus. In the second case, the budget deficit is calculated as Taxes ($50 billion) - Government Purchases ($30 billion) - Transfer Payments ($20 billion) = $0, but since the GDP is $200 billion and the sum of Consumption ($120 billion), Investment ($40 billion), and Government Purchases ($30 billion) is $190 billion, there is a $10 billion deficit.

You Have Some Estimates of National Accounts Numbers for a Closed