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Problems of inflation or unemployment

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Assume that production in the United States is valued at $10,000. National income is therefore $10,000. Of their income, workers pay $1,000 in taxes, save $500, spend $8,000 on consumer goods, and spend $500 on imports. Businesses spend $1,000 in new investment spending. And, foreigners spend $500 on exports. In order to avoid any problems of inflation or unemployment, the government should have a budget deficit or surplus of:

a. 0

b. $500 surplus

c. $500 deficit

d. $1,000 deficit 

e. $2,000 deficit

Reference no: EM131056465

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