Consider a closed economy (with no foreign trade). Assuming the economy was in equilibrium, use the following information to determine the government's budget deficit or surplus.
$\begin{array}{ll}
\text { Consumption Spending } & € 350 \text { billion } \
\text { Net Taxes } & € 270 \text { billion } \
\text { Household Saving } & € 250 \text { billion } \
\text { Investment Spending } & € 220 \text { billion }
\end{array}$
The government's deficit (surplus) was
A) €30 billion surplus.
B) €20 billion surplus.
C) €30 billion deficit.
D) €50 billion deficit.

Question

Consider a closed economy (with no foreign trade). Assuming the economy was in equilibrium, use the following information to determine the government's budget deficit or surplus. 
$\begin{array}{ll}
\text { Consumption Spending } & € 350 \text { billion } \
\text { Net Taxes } & € 270 \text { billion } \
\text { Household Saving } & € 250 \text { billion } \
\text { Investment Spending } & € 220 \text { billion }
\end{array}$
The government's deficit (surplus) was
A) €30 billion surplus.
B) €20 billion surplus.
C) €30 billion deficit.
D) €50 billion deficit.

Quizplus · Accepted Answer

The government's budget deficit (surplus) can be calculated using the following formula:

Government deficit (surplus) = Net taxes - government spending

In this case, government spending includes both consumption spending and investment spending.

So,

Government spending = €350 billion + €220 billion = €570 billion

And,

Government deficit (surplus) = €270 billion - €570 billion = - €300 billion

Since the resulting value is negative, it implies that the government had a budget deficit of €30 billion.

Consider a Closed Economy (With No Foreign Trade) The Government's Deficit (Surplus) Was A) €30 Billion Surplus

Consider a Closed Economy (With No Foreign Trade) The Government's Deficit (Surplus) Was
A) €30 Billion Surplus