Scenario 8-2. Assume the following information for an imaginary, closed economy.
GDP = $200,000; consumption = $120,000;
government purchases = $35,000; and taxes = $25,000.
-Refer to Scenario 8-2. For this economy, public saving is equal to
A) $-10,000 and the government is running a budget deficit of $10,000.
B) $-10,000 and the government is running a budget surplus of $10,000.
C) $10,000 and the government is running a budget deficit of $10,000.
D) $10,000 and the government is running a budget surplus of $10,000.

Question

Quizplus · Accepted Answer

Public saving = Taxes - Government purchases = $25,000 - $35,000 = -$10,000. A negative public saving indicates a budget deficit.