Question

Consider an economy in which GDP is $8.4 trillion, public saving is -$0.2 trillion (yes, it is a negative number), taxes are $0.8 trillion, private saving is $3.0 trillion, export is $0.4 trillion, and import is $0.5 trillion. Calculate consumption, government purchases, national saving, and investment.

Answer 1

Consumption = Y-T-private saving

= 8.4-0.8-3

= 4.6 trillion

Government purchase = T-public saving

= 0.8-(-0.2)

= 1 trillion

National saving = private saving+public saving

= 3+(-0.2)

= 2.8 trillion

Investment = saving = 2.8 trillion