The cyclical surplus is $450 billion, potential output is $10 trillion and tax rate is 15 percent. With this information, we can infer that the actual output of this economy is:

Question

Quizplus · Accepted Answer

The cyclical surplus is the difference between potential output and actual output. In this case, the cyclical surplus is $450 billion and potential output is $10 trillion. So, actual output must be $10 trillion - $450 billion = $9.55 trillion. Since the tax rate is 15%, the government collects $9.55 trillion * 0.15 = $1.43 trillion in taxes. Therefore, the actual output of this economy is $9.55 trillion + $1.43 trillion = $11 trillion.

The Cyclical Surplus Is $450 Billion, Potential Output Is $10