Differentiate between public and private savings using the national income accounts equation and explain the significance...

Differentiate between public and private savings using the national income accounts equation and explain the significance of each type of savings. Use the loanable funds market diagram to show what happens to interest rate and quantity of loanable funds if government revenues exceed its spending? Explain why it is important for a nation to increase savings? Label the diagram completely. You can draw the graph with a pen and insert a picture here.

Expert Solution

Private savings is household income which is not used for consumption or for paying taxes wheras public savings is what government saves..Private saving is Y-T+TR-C(Y is income,T is taxes,TR is transfers,and C is consumption).Public saving is T-G-TR which is government revenue through taxes minus government expenditure on goods and services minus transfers. A country's national savings is the sum of private and public savings.National savings is equal to the nation's income minus consumption and government taxes.

Budget deficit occurs when government spending exceeds government revenue.Government budget deficit means negative public saving and reduces national saving .Thus a government deficit budget lessens the supply of loanable funds , raises the interest rate and lessens investment.In a closed economy the impact of budget deficit is on national savings and on the supply of loanable funds . The supply curve shifts to the left as supply of loanable funds gets reduced.Interest rate rises from r1 to r2.In the open economy,reduction in the supply of loanable funds and increase in the interest rate reduces net capital outflow.

Savings help the economy to grow.Personal savings allow banks to extend loan to businesses which is used in investment on capital goods.More goods are produced which leads to the growth of the GDP in the country.

Rahul Sunny answered 2 years ago

Define and differentiate between public, private,nonprofit and private, for-profit organizations. What are the key differences

Question 1 Distinguish between private saving, public saving, and national saving. ( 3 marks) Explain the...

Question 1 Distinguish between private saving, public saving, and national saving. ( 3 marks) Explain the impact of an increase in the government budget surplus on private saving, public saving, and national saving. Suppose that in a closed economy the GDP is equal to $11,000, Taxes are equal to $2,500, Consumption equals $7,000, and Government purchases equal $3,000. Calculate private saving, public saving, and national saving?

Differentiate between private goods, pure public goods and impure public goods. Give one example of each....

Differentiate between private goods, pure public goods and impure public goods. Give one example of each. (approx 250 words)

'Net foreign factor income' in the national income accounts refers to the difference between A) the...

'Net foreign factor income' in the national income accounts refers to the difference between A) the income Americans gain from supplying resources abroad and the income that foreigners earn by supplying resources in the U.S B) the value of the products sold by Americans to other nations and the value of products bought by Americans from other nations C) the value of investments that Americans made abroad and the value of investments made by foreigners in the U.S D) the...

Is there a difference between private savings and personal savings? Are they interchangeable terms? If they...

Is there a difference between private savings and personal savings? Are they interchangeable terms? If they are different and not interchangeable, what is the differnce between them?

1B.Write on the differences between the following terms Public accounts- Private accounts- Government accounting Commercial accounting-...

1B.Write on the differences between the following terms Public accounts- Private accounts- Government accounting Commercial accounting- Cash accounting basis Accrual accounting basis Revenue Income Tax revenue Non-tax revenue The executive The legislative Government budget Incremental budget Recurrent expenditure Capital expenditure Internal audit External audit IPSAS 1 IAS 1

Explain the neutrality of income redistribution in the private provision of pure public goods

National Income The following are some of the national income accounts for the country of Ocean:...

National Income The following are some of the national income accounts for the country of Ocean: Name of accounts Amount (in billion $) Government purchases of goods and services 1721.6 Exports 1096.3 Receipts of factor income from the rest of the world 382.7 Depreciation 990.8 Net fixed investment 6882 Consumption expenditures 6739.4 Indirect business taxes 664.6 Imports 1475.8 Net interests 0 Payments of factor income to the rest of the world 343.7 Inventory changes 56.5 Social security contributions 702.7 Dividends...

The national income is $19.74 trillion, consumption is 69% of national income, private investment is 16%...

The national income is $19.74 trillion, consumption is 69% of national income, private investment is 16% of national income, and government spending is 18% of national income. What is the current account balance? a. $0.592 trillion b. -$0.592 trillion c. $0 d. Cannot be determined with the information given (SHOW ALL WORK)

National Highways Authority (NHA) is considering a public-private partnership with Friends construction as main contractor using...

National Highways Authority (NHA) is considering a public-private partnership with Friends construction as main contractor using a DBOMF contract for a new 50-mile motorway on the outskirts of Baluchistan Province. The design includes seven 10-mile-long commercial/retail corridors on both sides of the road. Motorway construction is expected to require 6 years at an average cost of $4 million per mile. The discount rate is 11% per year, and the study period is 30 years. Initial investment is $200 million distributed...

Question