Question

1. If the state of Texas's government collects $127 billion in tax revenues in 2015 and total spending in the same year is $128.5 billion, the result will be a:

A. budget deficit.

B. budget surplus

C. decrease in payroll tax.

D. decrease in proportional taxes.

2. A government annually spends $7 billion of its total tax revenue to weather related disaster relief, $25 billion to healthcare and $13 billion to education. If the government's annual tax revenue is $132 billion, what percentage of its budget is allocated to healthcare?

A. 5.3%

B. 18.9%

C. 9.8%

D. 15.90%

3. A government collects $800 billion annually in tax revenue. Each year it allocates $136 billion to interest payments that it must pay on its accumulated debt. What percentage of annual tax revenue is allocated to make these interest payments?

A. 17.0%

B. 28.8%

C. 18.6%

D. 27.6%

4. At the beginning 2010, the government of Denmark had no debt and held $390 billion dollars in its sovereign fund. To stimulate its economy during 2011, Denmark's government plans to spend $55 billion more than it will collect in tax revenue and in 2012, its spending will exceed tax revenues by $45 billion.  What will the total government debt equal at the end of 2012?

A. $290 billion

B. $0

C. $100 billion

D. $390 billion

Answer 1

(1) Tax revenue = $127 billion

Spending = $128.5 billion

Since the spending is higher than the tax revenue, it means there is budget deficit.

Note: If tax revenue > spending => Budget surplus.

If tax revenue = Spending => Balanced budget.

Answer: Option (A)

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(2) Tax revenue = $132 billion

Spending on healthcare is $25 billion

=> % of its budget in allocated to healthcare = (Spending on healthcare / Tax revenue)*100

=> % of its budget in allocated to healthcare = ($25 billion / $132 billion)*100

=> % of its budget in allocated to healthcare = 18.9%

Answer: Option ( B)

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(3) Interest payment = $136 billion

Tax revenue = $800 billion

% of annual tax revenue is allocated to make these interest payments = (Interest payments / Tax revenue)*100

=> % of annual tax revenue is allocated to make these interest payments = ($136 billion / $800 billion)

=> % of annual tax revenue is allocated to make these interest payments = 17%

Answer: Option (A)

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(4) Government debt = Sum of budget deficit - Sum of budget surplus.

Budget deficit = Spending - Tax revenue.

In 2011 spending was $55 billion more than the tax revenue.

=> Budget deficit in 2011 = $55 billion

In 2012 spending was $45 billion more than the tax revenue.

=> Budget deficit in 2012 = $45 billion

Government bond at the end of 2012 = Budget deficit in 2011 + Budget deficit in 2012

=> Government bond at the end of 2012 = $55 billion + $45 billion

=> Government bond at the end of 2012 = $100 billion

Answer: Option (C)