The country of Meritor uses the merit as its currency.Recent national income statistics shows that it has GDP of 700 million merits,no government transfer payments,taxes of 210 million merits,a budget surplus of 60 million merits,and investment of 200 million merits.What is the sum of its consumption and government expenditures?
A) 470 million merits
B) 490 million merits
C) 500 million merits
D) 560 million merits

Question

Quizplus · Accepted Answer

The formula for GDP in a closed economy is:
GDP = Consumption + Investment + Government expenditures
We are given that GDP = 700 million merits, Investment = 200 million merits, taxes = 210 million merits and budget surplus = 60 million merits.
Therefore, Government expenditures = taxes - budget surplus = 210 - 60 = 150 million merits.
Substituting the values in the formula above, we get:
700 = C + 200 + 150
Simplifying we get:
C + 350 = 700
C = 350
Therefore, the sum of consumption and government expenditures = C + G = 350 + 150 = 500 million merits.
Thus, the correct answer is Option C.

The Country of Meritor Uses the Merit as Its Currency