In examining the national income accounts of the closed economy of Nepotocracy you see that this year it had taxes of $100 billion, transfers of $40 billion, and government purchases of goods and services of $80 billion. You also notice that last year it had private saving of $50 billion and investment of $70 billion. In which year did Nepotocracy have a budget deficit of $20 billion?
A)this year and last year
B)this year but not last year
C)last year but not this year
D)neither this year nor last year

Question

Quizplus · Accepted Answer

This year, the budget deficit is calculated as government purchases ($80 billion) minus taxes ($100 billion) plus transfers ($40 billion), resulting in a deficit of $20 billion. Last year, the budget deficit is not given, but private saving and investment figures do not directly indicate a budget deficit.

In Examining the National Income Accounts of the Closed Economy