CSEET · Economic and Business Environment · National Income Accounting and Related Concepts
In an economy, household saving is ₹200 crore, taxes are ₹150 crore and imports are ₹100 crore. Investment is ₹180 crore and exports are ₹120 crore. For the circular flow to be in equilibrium, government expenditure must be:
Government expenditure must be ₹150 crore. Leakages are saving, taxes and imports, totalling ₹450 crore. Investment and exports supply ₹300 crore of injections, so government spending must supply the remaining ₹150 crore for equilibrium.
- A₹150 crore
- B₹120 crore
- C₹170 croreCorrect
- D₹270 crore
Explanation
Total leakages = 200 + 150 + 100 = ₹450 crore. Injections other than government spending = 180 + 120 = ₹300 crore. Equilibrium needs injections equal to leakages, so G = 450 − 300 = ₹150 crore. Check: 300 + 150 = 450. So the correct value is ₹150 crore, and the option marked is wrong if it differs.
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