If output is 80,000, consumption is 40,000, investment is 20,000 and government spending is 10,000, is...
If output is 80,000, consumption is 40,000, investment is 20,000 and government spending is 10,000, is this country running a trade deficit or a trade surplus? Explain.
Homework Answers
We use a simple formula Y = C + I + G + (EX - IM). In case of a deficit, the imports are more than the exports.
As per the given scenario above total output or Y is 80,000. Consumption is 40,000, investment is 20,000 and government spending is 10,000.
80,000 = 40,000 + 20,000 +10,000 + (Net exports).
80,000 = 70,000 + NE
NE = 80,000 - 70,000
NE = 10,000.
In this case, we have an export surplus. The country is running an export surplus of $10,000. (If the number was negative we would have a deficit. That means out consumption is more and output is less the gap is filled by imports. )
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