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

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Savings,Investment And The Financial System

Section: Chapter Questions

Problem 2QCMC

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Question

Government purchases of
goods and services = $200
$150 = Taxes
Consumer
spending = $700
Markets for goods
and services
Gross
domestic
product
Investment
spending = $120
Exports = $30
Imports = $50
Government
|
Households
Firms
Rest of world
Government borrowing = $70
Government transfers = $20
Reference: Ref 7(22)-2 Figure 7-2: Expanded Circular-Flow Model
Private savings = $170
Wages, profit,
interest,
rent = $1,000
D) net exports of $80
Wages, profit,
interest,
rent = $1,000
Factor
markets
Borrowing and
stock issues by
firms = $120
Foreign borrowing
and sales of stock = $110
Foreign lending and
purchases of stock = $130
C) investment spending of $120
(Figure 7-2: Expanded Circular-Flow Model) Use Figure 7-2: Expanded
Circular-Flow Model. How does the government finance its spending?
A) taxes of $150 plus borrowing of $70
Financial
markets
B) foreign borrowing and sales of stock of $110

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