Assume that production in the United States is valued at $100,000. National income is therefore $100,000. Of their income, workers save $2,000, pay $6,000 in taxes, spend $89,000 on consumer goods, and spend $2,000 on imports. Businesses spend $5,000 in new investment spending. Foreigners spend $1,000 on exports. To avoid any problems of inflation or unemployment, the government should have a budget deficit or surplus of: a. $2,000 surplus b. $1,000 deficit c. $2,000 deficit d. $1000 surplus e. $o deficit

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter3: International Financial Markets
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Assume that production in the United States is valued at $100,000.
National income is therefore $100,000. Of their income, workers save
$2,000, pay $6,000 in taxes, spend $89,000 on consumer goods, and
spend $2,000 on imports. Businesses spend $5,000 in new investment
spending. Foreigners spend $1,000 on exports. To avoid any problems of
inflation or unemployment, the government should have a budget deficit
or surplus of:
a. $2,000 surplus
b. $1,000 deficit
c. $2,000 deficit
d. $1000 surplus
e. $o deficit
Transcribed Image Text:Assume that production in the United States is valued at $100,000. National income is therefore $100,000. Of their income, workers save $2,000, pay $6,000 in taxes, spend $89,000 on consumer goods, and spend $2,000 on imports. Businesses spend $5,000 in new investment spending. Foreigners spend $1,000 on exports. To avoid any problems of inflation or unemployment, the government should have a budget deficit or surplus of: a. $2,000 surplus b. $1,000 deficit c. $2,000 deficit d. $1000 surplus e. $o deficit
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