We have been working very hard since 2009 to facilitate in your learning Read More. We can't keep up without your support. Donate Now.


+ Link For Assignments, GDBs & Online Quizzes Solution


+ Link For Past Papers, Solved MCQs, Short Notes & More

Government Purchases/Expenditures
Question Description

The Case:

Mega projects are crucial not only for the region but also for the individual livelihood. Population and their requirements are increasing with the passage of time. China Pakistan economic corridor (CPEC) is a mega project. It is the frame work of regional connectivity. This project will boost the economic activities not only for the people of Pakistan but also for the people of region. Besides, on one side this project will create many opportunities in the shape of employment, investment, more trade, more contact and more tax revenue for Pakistan while on the others hand, government development and non development expenditures will also be increased.


Keeping in view the above facts and figures, explain logically that how government expenditures/purchases would affect consumption in the economy of Pakistan.

+ http://bit.ly/vucodes (Link for Assignments, GDBs & Online Quizzes Solution)

+ http://bit.ly/papersvu (Link for Past Papers, Solved MCQs, Short Notes & More)

+ Click Here to Search (Looking For something at vustudents.ning.com?)

+ Click Here To Join (Our facebook study Group)

Views: 669

Replies to This Discussion

Please Discuss here about this GDB.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions. Read More>>

Discussed & be touched with this discussion. After discussion a perfect solution will come in a result at the end.



For Important Helping Material related to this subject (Solved MCQs, Short Notes, Solved past Papers, E-Books, FAQ,Short Questions Answers & more). You must view all the featured Discussion in this subject group.

For how you can view all the Featured discussions click on the Back to Subject Name Discussions link below the title of this Discussion & then under featured Discussion corner click on the view all link.

Or visit this link 

Click Here For Detail.


.•°How to Download past papers from study groups°•.


Please Click on the below link to see…

.... How to Find Your Subject Study Group & Join .... 


P.S:    Please always try to add the discussion in proper format title like “CS101 Assignment / GDB No 01 Solution & Discussion Due Date: ___________”

get back please if idea not helpfull. thank you


 thanks a lot

can you plzz explain more

dear  how government expenditures/purchases would affect consumption in the economy of Pakistan with CPEC ..yeh search krna hy

We all know that people spend a part of their income on consumption, a part is used to pay taxes and save the rest i.e. Total income, Y = C+S+T. Taxes imposed by govt. take a part of the income away from the household and disposable income becomes, Y* = C + S or Y - T.

Let us define a variable ‘c’ = marginal propensity to consume, it is the fraction of total additional income that people use for consumption.

Similarly, suppose planned investment demand of firms = I, also a given item.

Planned Govt. expenditure = G

Taxes imposed by govt. = T

Thus aggregate demand for final goods in economy, AD = demand due to planned consumption + planned investment demand + demand on account of govt. expenditure.

i.e. AD = C*+ c.Y* + I + G = C*+ I + G + c (Y - T)

When the final goods market reaches equilibrium, aggregate demand = output of goods and services in economy = National income/ GDP.

i.e. Y = C*+ I + G + c (Y - T)

ΔY = ΔG + c ( ΔY - ΔT) since planned investment and minimum consumption level does not change (ΔC* = ΔI = 0)

Now coming to your question when ΔG = ΔT, we have

ΔY / ΔG = (1-c) / (1-c) = 1

This means national income increases by the same amount by which govt. spending increases, and the balanced budget multiplier is unity. For instance if G increases in a fiscal year by 500 the equilibrium income would also increase by 500 in this case.


Looking For Something? Search Here


This is a member-supported website. Your contribution is greatly appreciated!

© 2020   Created by +M.Tariq Malik.   Powered by

Promote Us  |  Report an Issue  |  Privacy Policy  |  Terms of Service