Question

The following table contains data for a hypothetical closed economy that uses the dollar as its currency. Suppose GDP in this country is $1,175 million. Enter the amount for consumption. National Income Account Value (Millions of dollars) Government Purchases (GG ) 250 Taxes minus Transfer Payments (TT ) 225 Consumption (CC ) Investment (II ) 300 Points: Close Explanation Explanation: Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S)National Saving (S) = = selector 1    G - TG - T Y - T - GY - T - G Y - CY - C Y - C - GY - C - G = = selector 2    CC GG YY II million Points: Close Explanation Explanation: Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private SavingPrivate Saving = = selector 1    Y - C - TY - C - T C - TC - T Y - T - IY - T - I T - GT - G = = million Points: Public SavingPublic Saving = = selector 1    T - GT - G Y - T - IY - T - I C - TC - T Y - C - TY - C - T = = million Points: Close Explanation Explanation: Based on your calculations, the government is running a budget selector 1    deficit surplus .

Answer 1

(1)

C = GDP - I - G = 1,175 - 300 - 250 = $625 million

(2)

National saving = Y - C - G = I = $300 million

(3)

Private saving = Y - C - T = 1,175 - 625 - 225 = $325 million

(4)

Public saving = T - G = 225 - 250 = -$25 million

(5)

Since public saving is negative, government is running budget deficit.