Government purchases ofgoods and services = $200$150 = TaxesConsumerspending = $700Markets for goodsand servicesGrossdomesticproductInvestmentspending = $120Exports = $30Imports = $50Government|HouseholdsFirmsRest of worldGovernment borrowing = $70Government transfers = $20Reference: Ref 7(22)-2 Figure 7-2: Expanded Circular-Flow ModelPrivate savings = $170Wages, profit,interest,rent = $1,000D) net exports of $80Wages, profit,interest,rent = $1,000FactormarketsBorrowing andstock issues byfirms = $120Foreign borrowingand sales of stock = $110Foreign lending andpurchases of stock = $130C) investment spending of $120(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: ExpandedCircular-Flow Model. How does the government finance its spending?A) taxes of $150 plus borrowing of $70FinancialmarketsB) foreign borrowing and sales of stock of $110

The way of financing government spending can be done in two ways one is by collecting taxes and…

Answered: = purchases of ervices = $200 $150 =…

= purchases of ervices = $200 $150 = Taxes Government Government borrowing = $70 Government transfers = $20 Private savings = $170

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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