Suppose that in a closed economy GDP is 11,000,consumption is 7,500,and taxes are 500.What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?
A)1,500,deficit
B)1,500,surplus
C)1,000,deficit
D)1,000,surplus

Question

Quizplus · Accepted Answer

National savings is calculated as GDP - Consumption - Government Purchases. To make national savings equal to 2,000, Government Purchases must be 1,500 (11,000 - 7,500 - 1,500 = 2,000). With taxes at 500 and government purchases at 1,500, the government runs a deficit of 1,000 (500 - 1,500 = -1,000).

Suppose That in a Closed Economy GDP Is 11,000,consumption Is