Question

In: Economics

Closed economy: Y = $12 trillion C = $ 8 trillion G = $ 2 trillion...

Closed economy:

Y = $12 trillion
C = $ 8 trillion
G = $ 2 trillion
Public Saving = -$0.50 trillion

  1. a) Net Taxes (T)
  2. b) Private Saving
  3. c) Investment
  4. d) Government budget surplus or deficit

Please explain.

Solutions

Expert Solution


a) Net Taxes (T)
Public saving =T-G=-0.5
G=2
then
T-2=-0.5
T=-0.5+2=1.5 trillion
the net taxes is $1.5 trillion

b) Private Saving

Private saving=Y-T-C
=12-1.5-8
=2.5
the private saving is $2.5 trillion

c) Investment
Investment =national saving =public saving + private saving
=2.5+(-0.5)
=2
investment =$2 trillion

d) Government budget surplus or deficit

Government is in budget deficit as the public saving is negative
Budget balance =T-G
=public saving
=-0.5 trillion
the budget deficit of $0.5 trillion

Rahul Sunny answered 2 years ago
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