The Accompanying Table Gives Budget Information for a Hypothetical Economy

question 94

Multiple Choice

$$\begin{array} { | c | c | c | c | } \hline & \begin{array} { c } \text { Government } \\\text { Spending }\end{array} & \text { Tax Revenues } & \text { GDP } \\\hline \text { Year 1 } & \$ 450 & \$ 425 & \$ 2,000 \\\hline \text { Year 2 } & 500 & 450 & 3,000 \\\hline \text { Year 3 } & 600 & 500 & 4,000 \\\hline \text { Year 4 } & 640 & 620 & 5,000 \\\hline \text { Year 5 } & 680 & 580 & 4,800 \\\hline \text { Year 6 } & 600 & 620 & 5,000 \\\hline\end{array}$$ The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. A budget surplus occurred in year

• A) 2.
• B) 3.
• C) 4.
• D) 6.

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Definitions:

Reserves

Vault cash and deposits of banks held by Federal Reserve district banks.

Deposits

Funds placed into an account at a financial institution for safekeeping and often to earn interest.

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulating banks, maintaining financial stability, and providing banking services to governmental institutions.

Board of Governors

The Federal Reserve System’s governing body.