Scenario 8-3. Assume the following information for an imaginary, open economy.
Consumption = $1,000; investment = $300; net exports = $100;
taxes = $230; private saving = $200; and national saving = $150.
-Refer to Scenario 8-3. For this economy, government purchases amount to
A) $130.
B) $180.
C) $280.
D) $330.

Question

Quizplus · Accepted Answer

Government purchases = (National Saving + Net exports) - (Private Saving + Investment + Consumption + Taxes) 
= ($150 + $100) - ($200 + $300 + $1,000 + $230) 
= $250 - $1,730 
= -$1,480 (negative sign indicates that the economy is running a budget deficit) 
Since negative government purchases are not feasible, the closest option is $280, which is the correct answer.