Use the following to answer questions:
-(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The government has a budget:
A) surplus of $150.
B) surplus of $220.
C) deficit of $70.
D) deficit of $200.

Question

Use the following to answer questions: 
-(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded Circular-Flow Model The government has a budget:
A) surplus of $150. 
B) surplus of $220. 
C) deficit of $70. 
D) deficit of $200.

Quizplus · Accepted Answer

In the circular-flow model, the government sector is represented by the flow of money from households and firms to the government through taxes and the flow of money from the government to firms and households through government spending. A deficit occurs when government spending exceeds tax revenue, indicating that the government is spending more money than it is receiving. In this model, the government sector is shown to have an outflow of $270 (tax revenue) and an inflow of $200 (government purchases), resulting in a deficit of $70 ($270 - $200 = -$70).

Use the Following to Answer Questions