P3 Consider the following consumption function: C(Y)=0.8 (Y-T), where Y represents income and T representsnet taxes. Suppose that investment, I, is 100; government spending, G, is 200; and, net taxes, T, are 100.The budget deficit is equal to:O a.-200O b.0O c. 300O d. 100

Budget deficit refers to difference between income and expenditure of government.

Consider the following consumption function: C(Y)=0.8 (Y-T), where Y represents income and T represents het taxes. Suppose that investment, I, is 100; government spending, G, is 200; and, net taxes, T, are 100. The budget deficit is equal to: O a.-200 O b.0 O c. 300 O d. 100

Consider the following consumption function: C(Y)=0.8 (Y-T), where Y represents income and T represents het taxes. Suppose that investment, I, is 100; government spending, G, is 200; and, net taxes, T, are 100. The budget deficit is equal to: O a.-200 O b.0 O c. 300 O d. 100

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 2.9P

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Question

Consider the following consumption function: C(Y)=0.8 (Y-T), where Y represents income and T represents
net taxes. Suppose that investment, I, is 100; government spending, G, is 200; and, net taxes, T, are 100.
The budget deficit is equal to:
O a.-200
O b.0
O c. 300
O d. 100

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