Scenario 18-1.Assume the following information for an imaginary,closed economy.

-Refer to Scenario 18-1.For this economy,taxes amount to
A) $28,000.
B) $38,000.
C) $41,000.
D) $44,000.

Question

Scenario 18-1.Assume the following information for an imaginary,closed economy.
 
-Refer to Scenario 18-1.For this economy,taxes amount to
A) $28,000. 
B) $38,000. 
C) $41,000. 
D) $44,000.

Quizplus · Accepted Answer

The GDP in this economy is $500,000 ($200,000 + $100,000 + $50,000 + $50,000 + $100,000). Tax revenue is 20% of GDP, so taxes amount to $100,000. However, government expenditures are $59,000 ($15,000 + $22,000 + $22,000), so the government has a budget deficit of $41,000, which means taxes amount to $41,000.