Question

You are given the following data on an economy.

Gross national product 20

Government purchases of goods 4

and services

                                              

Government deficit 1

National saving 2

Investment 4

Net factor payments -1

Find the following:

a. Consumption

b. Private saving

c. Disposable income

d. Gross domestic product

e. Net exports

Answer 1

a.

Note: Y = GNP

National Saving = Y - C - G

2 = 20 - C - 4

C = Consumption = 16 - 2 = 14.

b.

Private saving = National saving - public saving = 2 - (-1) = 3.

c.

Budget surplus = G - T

1 = 4 - T

T = 3

Disposable income = Y - T = 17.

d.

GDP = GNP - Net factor payments = 20 - (-1) = 21.

e.

GDP = C + I + G + NX

21 = 14 + 4 + 4 + NX

NX = -1.