Question

In: Economics

The following table contains data for a hypothetical closed economy that uses the dollar as its...

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
.

Solutions

Expert Solution

(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.


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