Suppose real national income (Y)is equal to 800 and government purchases are equal to 200.If the government's net tax revenues are equal to tY,where t is the net tax rate,then what is the value of t necessary for the government to have a balanced budget?
A)20%
B)25%
C)30%
D)35%
E)40%

Question

Quizplus · Accepted Answer

For the government to have a balanced budget, its tax revenues must equal its expenditures. Given that government purchases are 200, and tax revenues are tY (where Y = 800), we need to find the value of t that makes tax revenues equal to 200. Setting tY = 200 and substituting Y = 800 gives us t*800 = 200. Solving for t gives t = 200/800 = 0.25, or 25%.

Suppose Real National Income (Y)is Equal to 800 and Government