Question

The country of Meditor, a small country with a closed economy, uses the merit as its currency. Recent national income statistics showed that it had GDP of $600 million merits, taxes of $150 million merits, a budget surplus of $40 billion merits, and investment of $100 billion merits. What were its consumption and government expenditures on goods and services?

Answer 1

d. $390 million merits and $110 million merits

Step-by-step explanation:

The computation of the consumption and the government expenditure is shown below:

As we know that

Budget Surplus = Taxes - government expenditure

$40 = $150 - government expenditure

So, the government expenditure is $110 million

In addition,

Gross domestic product = Consumption + investment + government expenditure + net exports

$600 = Consumption + $100 + $110 + $0

So, the consumption is

= $600 - $100 - $110

= $390 million

We simply applied the above formulas in order to find out the consumption and government expenditure