Question

1. The economy has two banks A and B, a corporate sector, and a household sector. Identify the real assets and calculate the national wealth of the economy. (5 points

2. Assets ($ Billion)		Liability ($ Billion)
   Households’ Deposits	$100,000	Deposits with Bank A	$20,000
   Bank A’s Loan to Households	$20,000	Deposits with Bank B	$80,000
   Bank B’s Loan to Firms	$80,000	Loan from Bank A	$20,000
   Plant and Equipment	$150,000	Loan from Bank B	$80,000
   Property and Land	$200,000
   Goods and Inventory	$125,000

Answer 1

Question :  The economy has two banks A and B, a corporate sector, and a household sector. Identify the real assets and calculate the national wealth of the economy.

Answer : Real Assets are : Plant and Equipment, Property and Land and Good and Inventory

The national wealth of the economy = Total value of all assets - Total value of all debt

From the question, we have the following data :

Households’ Deposits	$100,000	Deposits with Bank A	$20,000
Bank A’s Loan to Households	$20,000	Deposits with Bank B	$80,000
Bank B’s Loan to Firms	$80,000	Loan from Bank A	$20,000
Plant and Equipment	$150,000	Loan from Bank B	$80,000
Property and Land	$200,000
Goods and Inventory	$125,000

Total Assets = $675,000 Total Debt = $200,000

Substituting thes values in the above formula, we get

Nation wealth = $675,000 - $200,000 = $475,000

Hence,   Plant and Equipment, Property and Land and Good and Inventory are the real assets over here.

  The national wealth of the economy = $475,000