Suppose Country A had net taxes of $30 million and government expenditures of $35 million. In addition, household saving in Country A totaled $5 million while consumption was $80 million. The government of Country A is running a budget ________ and national saving is ________ million.
A) surplus; $5
B) deficit; -$5
C) deficit; $0
D) surplus; $25

Question

Quizplus · Accepted Answer

The government is running a deficit because its expenditures ($35 million) exceed its net taxes ($30 million). National saving is calculated as the sum of government saving (net taxes minus government expenditures) and private saving (household saving). Here, government saving is -$5 million ($30 million - $35 million) and household saving is $5 million, totaling $0 million in national saving.

Suppose Country a Had Net Taxes of $30 Million and Government