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1 February, 14:29

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?

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  1. 1 February, 14:41
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    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
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