Suppose that a country's government expenditures are $400 billion, net taxes are $300 billion, saving is $300 billion, and investment is $250 billion. There is a private sector
A)surplus of $150 billion.
B)surplus of $50 billion.
C)deficit of $150 billion.
D)deficit of $50 billion.
E)deficit of $250 billion.

Question

Quizplus · Accepted Answer

National saving (S) = private saving + government saving = $300 billion
Total demand in the economy (Y) = C + I + G = $900 billion (assuming consumption is $350 billion)
So, Y - S - T = I
$900 billion - $300 billion - $300 billion - $300 billion = $0 billion (meaning there is no deficit or surplus)
Therefore, private sector surplus = investment - (Y - S - T) = $250 billion - $0 billion = $250 billion
However, since the question asks for the private sector surplus in relation to government expenditures and net taxes, we need to subtract those from the $250 billion to get the final answer: $250 billion - $400 billion + $300 billion = $50 billion.

Suppose That a Country's Government Expenditures Are $400 Billion, Net