Question

The figure shows the flows of expenditure and income in an economy In 2008, J was $2.5 trillion Rwas $2.0 trillion. Z was 1.5 trillion, Q was $11.0 trillion, and U was $1.0 trillion. HOUSEHOLDS FINANCIAL MAUKITE Calculate saving and consumption expenditure. >> Answer to 1 decimal place Consumption expenditure is $|| trillion. GOVERNMENTS Saving is s trillion FIRMS

Answer 1

As per the information provided in the question

Investment (J) =$2.5 trillion

Tax paid to Government (R) =$2.0 trillion

Demand from rest of the world (Z) or Export =$1.5 trillion

Import (not given) = 0

Factor income received by household (Q) =$11.0 trillion

Government expenditure (U) =$1.0 trillion

In a four sector economy, the economy will be at equilibrium level when

Savings + Tax paid to Government + Import = Investment + Government expenditure + Export

Savings + $2.0 + 0 = $2.5 + $1.0 + $1.5

Savings + $2.0 = $5.0

Savings = $5.0 - $2.0 = $3.0 trillion

Savings = $3.0 trillion

Factor income received by household = Consumption Expenditure + savings + Tax paid to Government

Consumption Expenditure = Factor income received by household – (savings + Tax paid to Government)

Consumption Expenditure = $11.0 – ($3.0 + $2.0) =$11.0 - $5.0 = $6.0 trillion

Consumption Expenditure = $6.0 trillion