Listed below is the government budget:
Investment = K1000 million
Tax revenue = K3000 million
Government spending = K4000 million
Savings = K1000 million
Export = K4000 million
Import = K5000 million
Use the information above to answer this questions:
A. Calculate withdrawals
B. Calculate injections
C. From the calculations, is injection greater or less
D. Based on your answer in (c), what will be the likely effect on the economy?
.
A. Withdrawals = Savings + Taxes + Imports
Withdrawals = K1000 million + K3000 million + K5000 million
Withdrawals = K9000 million
B. Injections = Investment + Government spending + Exports
Injections = K1000 million + K4000 million + K4000 million
Injections = K9000 million
C. Injection is equal to withdrawals.
D. If injections are greater than withdrawals, it would lead to an increase in economic activity and growth. However, if withdrawals are greater than injections, it could lead to decrease in economic activity and potentially a recession. With injections equal to withdrawals, the economy would likely remain stable.