The government would have a deficit of $500.
An overrun in spending over income results in a budget deficit, which can be a sign of a nation's financial stability. The phrase is frequently used to describe government spending rather than that of companies or people.
When revenue outpaces spending, a budget surplus results. When a government has a surplus, it has extra funds that can be invested or applied to debt repayment. The opposite of a surplus is a deficit. When spending outpaces income, the government must borrow money to pay for expenditures.
Consumption (C) = 6500
National savings = 1000
GDP (Y) = 10000
Taxes (T) = 2000
Government Expenditure (G) = ?
By using the given values we will get:
National Savings = GDP - Consumption - Government Expenditure
1000 = 10000 - 6500 - G
G = 3500 - 1000
G = 2500
Therefore, the government expenditure =$2500
Budget surplus = Taxes - Government Expenditure
= 2000 - 2500 = -$500
Since the balance is negative so it will be a deficit budget of $500
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