You Have Some Estimates of National Accounts Numbers for a Closed

question 114

Multiple Choice

You have some estimates of national accounts numbers for a closed economy for the coming year. Under one set of expectations, government purchases will be $30 billion, transfer payments will be $10 billion, and taxes will be $45 billion. Under another set of expectations, GDP will be $200 billion, taxes will be $50 billion, transfer payments will be $20 billion, consumption will be $120 million, and investment will be $40 billion. Based on these numbers in the first case there should be a

• A)$15 billion surplus, and in the second case a $10 billion surplus.
• B)$15 billion surplus, and in the second case a $10 billion deficit.
• C)$5 billion surplus, and in the second case a $10 billion surplus.
• D)$5 billion surplus, and in the second case a $10 billion deficit.

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Definitions:

Variable Operating Expenses

Operating costs that fluctuate with changes in the volume of production or sales, like raw materials and direct labor costs.

Fixed Operating Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Variable Costs

Costs that change in proportion to the level of activity or volume of goods produced.

Straight-Line Depreciation

An approach to apportion the cost of a tangible asset throughout its operational life in equal yearly sums.