Question

Suppose that in an? economy, investment is? $400 billion, saving is? $400 billion, tax revenues are? $500 billion, exports are? $300 billion, and imports are? $200 billion. what is government expenditure and the government budget? balance?

Answer 1

By definition, government expenditure refers to the money used in the acquisition of goods and services for current use. In this case, the government expenditure is simply equivalent to investment.

Government expenditure = $400 billion

From economics: I=S+T–G+M–X

Where

I = Investment

S = Savings

T= Tax revenues

G =Government budget

M = Import

X = Export

Rearraging to get G:

G = S – I + T + M – X

G = $400 billion - $400 billion + $500 billion + $200 billion - $300 billion

G = Government budget = $400 billion