Suppose in a given fiscal year government purchases equal $1000, tax revenues are $1200, and transfer...
Suppose in a given fiscal year government purchases equal $1000, tax revenues are $1200, and transfer payments are $200. There is a budget deficit of ?
C. 200
B. 400
C. 600
D. The budget is unbalanced.
Homework Answers
The budget is balanced.
Budget deficit ($) = Government purchase + Transfer payments - Tax revenue = 1000 + 200 - 1200 = 0
Since budget deficit is zero, there is a balanced budget.
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