Question

In each part that follows, use the economic data given to find national saving, private saving, public saving, and the national saving rate.

a.

Household saving	200
Business saving	400
Government purchases of goods and services	200
Government transfers and interest payments	120
Tax collections	215
GDP	2,700

Instructions: Any negative values should be indicated with a minus sign (-). Round the national saving rate to one decimal place.

National saving	Private saving	Public saving	National saving rate
			%

b.

GDP	6,250
Tax collections	1,625
Government transfers and interest payments	400
Consumption expenditures	4,540
Government budget surplus	100

Instructions: Enter your response for the national saving rate rounded to one decimal place.

National saving	Private saving	Public saving	National saving rate
			%

c.

Consumption expenditures	4,500
Investment	1,000
Government purchases	1,000
Net exports	10
Tax collections	1,625
Government transfers and interest payments	500

Instructions: Enter your response for the national saving rate rounded to one decimal place.

National saving	Private saving	Public saving	National saving rate
			%

Answer 1

(A). Public saving = government budget surplus

=tax collections – government purchases – transfers and interest payments

=215-200-120

= -105

Private saving = Household saving + business saving

= 200+400

= 600

National saving = Private saving + public saving

= 600-105

= 495

National saving rate = National saving/GDP

= 495/2700

= 18.3%

(B)

1. Private sector disposable income = GDP - Taxes + Transfers = 6250 - 1625 + 400 = 5025
2. Private sector savings = disposable income - consumption = 5025 - 4540 = 485
3. Public savings = Govt budget surplus = 100
4. National savings = Private savings + Govt savings = 485 + 100 = 585
5. National savings rate = National savings / GDP = 585 / 6,250 = 9.4 percent

​(C)

1. GDP = C + I + G + NX = 4,500 + 1,000 + 1,000 + 10 = 6,510
2. Govt savings = Taxes - Transfers - Govt spending = 1,625 - 500 - 1,000 = 125
3. Private sector disposable income = GDP - Taxes + Transfers = 6,510 - 1,625 + 500 = 5,385
4. Private sector savings = disposable income - consumption = 5,385 - 4,5000 = 885
5. National savings = Private savings + Government savings = 885 + 125 = 1,010
6. National savings rate = National savings / GDP = 1,010 / 6,510 = 15.5 percent