Suppose that a country's government expenditures are $500 billion, net taxes are $400 billion, saving is $200 billion, and investment is $250 billion.The country has a government budget

Question

Quizplus · Accepted Answer

Government budget can be calculated as follows:
Government budget = Net taxes - Government expenditures = $400 billion - $500 billion = -$100 billion
Since the value is negative, the government has a budget deficit.
Private sector saving (S) = $200 billion
Private sector investment (I) = $250 billion
Private sector balance = S - I = $200 billion - $250 billion = -$50 billion
Since the value is negative, the private sector also has a deficit. Hence, the correct option is B - deficit and a private sector deficit.

Suppose That a Country's Government Expenditures Are $500 Billion, Net