The following shows the circularflow diagram for the closed

The following shows the circular-flow diagram for the closed economy of Puyallup Government purchases of goods and services Government borrowing Government Taxes Government transfers Consumer spending Private savings Households Wages, profit, interest, rent Markets for goods and services Factor markets Financial markets Total spending on goods and services Wages, profit, interest, rent Borrowing and stock issues by firms Firms Investment spending Govemment purchases of goods and services Taxes Transfers Wages, profit, interest, rent Consumer spending Investment spending $500 $350 $100 $4500 $3750 $250 Given the information in the table above, solve for the following variables. Enter the number of dollars and no dollar sign e.g. one thousand dollars-1000 a. Government borrowing b. Private savings: c. Total spending on goods and services:

Solution

Government borrowing= government purchases + transfers - taxes

= 500+100-350= 250

Private saving= income + transfer - consumption - taxes

= 4500 + 100 - 3750 - 350= 500

Total spending on goods = consumer spending + investment spending + government purchases of goods and services

= 3750+250+500

= 4500