Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the actual budget deficit is:
A)$200 billion.
B)$20 billion.
C)$40 billion.
D)$60 billion.

Question

Refer to the above diagram where T is tax revenues and G is government expenditures.All figures are in billions of dollars.If the full-employment GDP is $400 billion while the actual GDP is $200 billion, the actual budget deficit is:
A)$200 billion. 
B)$20 billion. 
C)$40 billion. 
D)$60 billion.

Quizplus · Accepted Answer

The actual budget deficit is the difference between government expenditures (G) and tax revenues (T). From the diagram, we can see that G is $260 billion and T is $220 billion. Therefore, the actual budget deficit is G - T = $260 billion - $220 billion = $40 billion.

Refer to the Above Diagram Where T Is Tax Revenues