Weeland is a small country. Its population total is 500. However there are only

Question

Weeland is a small country. Its population total is 500. However there are only 200 wage earners. Each wage earners earns an average of $3,000.00 per year and spends a total of $2,500.00 per year buying goods and services of which $300.00 goes to buying imported goods.

Each year the country exports a total of $50,000.00 worth of goods and services.

The Government income tax rate is 15%. All government money is spent on education and healthcare.

There are only two industries in the country that employ every wage earner. Each industry spends $15,000 each year on new tools and equipment.

What is the value of Consumption? Show your work.

Explanation / Answer

Total wage earners in the economy = 200 wage earners

Spending by each wage earner = $2,500

Calculate the value of consumption -

Value of consumption = Total number of wage earners * Spending by each wage earner

Value of consumption = 200 * $2,500 = $500,000

Thus,

The value of consumption is $500,000.

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