Where Y is GDP, C is consumption, T is net taxes and G is government spending, if there is no international trade, then the government budget surplus equals:
A)T - G
B)Y - T - C
C)Y + T - G
D)Y - C - T

Question

Quizplus · Accepted Answer

If there is no international trade, then GDP (Y) is equal to consumption (C), net taxes (T), and government spending (G). Therefore, Y = C + T + G. Rearranging this equation, we get T = Y - C - G. Since the government budget surplus is equal to net taxes minus government spending, the answer is A) T - G, which simplifies to (Y - C - G) - G, or Y - C - 2G. However, we do not know the value of G, so we cannot simplify further.

Where Y Is GDP, C Is Consumption, T Is Net