Suppose the only revenue taken in by the government is in the form of income tax, and the tax rate is 10 percent. If aggregate income is $800 billion, and government outlays are $100 billion then the government budget has

Question

Quizplus · Accepted Answer

The government collects income tax amounting to $80 billion ($800 billion multiplied by 10%). Since government outlays amount to $100 billion, there is a deficit of $20 billion ($100 billion in outlays minus $80 billion in revenue).

Suppose the Only Revenue Taken in by the Government Is