In 2005, the government of DANA spent $100 billion and collected $95 billion revenue. DANA's GDP in 2005 was $400 billion. The government of DANA had a budget ________ equal to ________ of GDP in 2005.
A) deficit; 5 percent
B) surplus; 5 percent
C) deficit; 1.25 percent
D) surplus; 1.25 percent

Question

Quizplus · Accepted Answer

A deficit is when the government spends more than it collects in revenue, while a surplus is when the government collects more than it spends. To calculate the budget as a percentage of GDP, we need to divide the difference between spending and revenue ($100 billion - $95 billion = $5 billion) by GDP ($400 billion) and multiply by 100 to get a percentage. This gives us a deficit of 1.25 percent of GDP, which corresponds to answer choice C.

In 2005, the Government of DANA Spent $100 Billion and Collected