Question

Consider a hypothetical country Econostan that uses the dollar as its currency. For the fiscal year, the Econostani government spent $125 million, and collected $140 million. At the beginning of the year, Econostan had total debt outstanding of $850 million. Econostani's total GDP for the year was $1,670 million. Use this information to answer the next several questions (81 - 84) amount. 81. For the fiscal year, we would say that the Econostani government experienced a a) balanced budget; $0 b) budget surplus; $15 million c) budget surplus; $125 million d) budget deficit; $140 million e) budget deficit; $850 million 82. For the fiscal year, Econostani a) decreased its total outstanding debt by $15 million b) decreased its total outstanding debt by $140 million c) increased its total outstanding debt by $125 million d) increased its total outstanding debt by $15 million e) neither increased nor decreased its total outstanding debt 83. At the end of the year, what is Econostani's new total government debt? a) $850 million, the same at the beginning of the year b) $125 million c) $975 million d) $835 million e) $710 million

Answer 1

Solution :- 81

The Correct Answer is (B) that is Budget Surplus ; $15 million

As if the Government income is more than its spending than it means there is Budget Surplus and if Government Spending is more than its Income than it is Budget Deficit

Here Goverment Collection = $140 million

and Government Spending = $125 million

So Budget Surplus = $140 - $125 = $15 million

Solution :- 82

The Correct Answer is (A) that is decreased its total outstanding debt by $15 million

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