Suppose the only revenue taken in by the government is in the form of income tax, and the tax rate is 10 percent. If aggregate income is $800 billion, and government outlays are $100 billion, then the government budget has
A) a deficit of $20 billion.
B) a surplus of $20 billion.
C) neither a surplus nor a deficit.
D) a deficit of $80 billion.

Question

Quizplus · Accepted Answer

The government collects 10% of $800 billion in taxes, which is $80 billion. With government outlays of $100 billion, there is a deficit of $20 billion ($100 billion - $80 billion).

Suppose the Only Revenue Taken in by the Government Is