Macro Econ help.?
The following is the data for a hypothetical island economy. All values are in billions of real dollars. Assume that the island economy does not engage in trade with any other countries.
Gross Domestic Product$2,000
Taxes $ 400
Government Purchases$ 500
Investment $ 300
Consumption $1,200
What is the status of the federal budget?
A. Surplus of $100 billion
B. Deficit of $400 billion
C. Surplus of $300 billion
D. Deficit of $100 billion
Do I use the forumula
S= Y-C-G
=2000-1200-500= 300? C.
I’m guessing though that That gives me the savings, how do I get the government spending equation?
By the way thank you all for helping me on the previous questions.
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You could use Y = C + I + G – T (Y = income)
Therefore 2000 = 1200 + 300 + 500 – 400
Your result 2000 = 1600
The economy would be going into recession, other things being equal. The government should increase expenditure or reduce taxation or both.
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