In a certain economy in 2005,GDP amounted to $5,000;consumption amounted to $3,000;government purchases were equal to investment;and the value of imports exceeded the value of exports by $200.It follows that government purchases amounted to

Question

Quizplus · Accepted Answer

Using the formula for calculating GDP:
GDP = Consumption + Investment + Government purchases + (Exports - Imports)
We can rearrange it to find the value of investment:
Investment = GDP - Consumption - Government purchases - (Exports - Imports)

Substituting the given values:
$5,000 = $3,000 + Investment + Government purchases - $200
Simplifying:
$2,200 = Investment + Government purchases

Given that Government purchases = Investment, we can substitute:
$2,200 = 2 x Government purchases
Government purchases = $1,100.

Therefore, the option B) $1,100 is the correct answer.

In a Certain Economy in 2005,GDP Amounted to $5,000;consumption Amounted