Suppose you are using a Keynesian model to analyze an economy and you are given the following information about this economy.
Aggregate Expenditure = C + I + G + (X -M)
C = consumption spending = 20 + 0.5(Y – T)
T = autonomous taxes = $ 10 million
I = investment spending = $ 100 million
G = government spending = $20 million
(X – M) = net exports = $10 million
Yfe = Full employment GDP = $320 million
P = aggregate price level = is constant and does not change
1. Given this information, is the government of this economy running a balanced budget, a budget surplus, or a budget deficit? Explain your answer.
2. Given this information, describe this country’s trade balance. Explain your answer.