Suppose that real national income (Y)is equal to 800 and that 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 a balanced budget, government purchases (200) must equal net tax revenues (tY). Given Y = 800, we solve for t: 200 = t * 800, so t = 200/800 = 0.25 or 25%.

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