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 = 160

     Government transfers and interest payments = 110

     Tax collections = 195     GDP = 2,500

Instructions: Enter your response for the national saving rate rounded to one decimal place. If you are entering any negative numbers, be sure to include a (-) in front of those numbers.

National saving	Private saving	Public saving	National saving rate
			%

b. GDP = 6,150     Tax collections = 1,425

     Government transfers and interest payments = 400

     Consumption expenditures = 4,520

     Government budget surplus = 100

Instructions: Enter your response for the national saving rate rounded to one decimal place. If you are entering any negative numbers, be sure to include a (-) in front of those numbers.

National saving	Private saving	Public saving	National saving rate
			%

c. Consumption expenditures = 4,300     Investment = 1,000

     Government purchases = 1,000     Net exports = 6

     Tax collections = 1,575

     Government transfers and interest payments = 500

Instructions: Enter your response for the national saving rate rounded to one decimal place. If you are entering any negative numbers, be sure to include a (-) in front of those numbers.

National saving	Private saving	Public saving	National saving rate
			%

Answer 1

Solution:-

Part: - A

Public Saving = {Tax Collection – Transfer and Interest Payment – Government Purchase}

                         = {195 – 110 – 160}

                         = -75

Private Saving = Household Saving + Business Savings

                          = 200 + 400

                          = 600

National Saving = Government Saving + Private Savings

                               = -75 + 600

                               = 525

National Saving Rate = National Saving / GDP * 100

                                      = 525 / 2500 * 100

                                      = 0.21 * 100

                                      = 21%

National Saving	Private Saving	Public Saving	National Saving Rate
525	600	-75	21%

Part: - B

Public Saving = Government Budget Surplus

                         = 100

Private disposable income = GDP – Tax Collection + Transfer and Interest Payment

                                           = 6150 - 1425 + 400

                                           = 5125

Private savings = disposable income - consumption expenditure

                         = 5125 - 4520

                         = 605

National savings = Private savings + Public savings

                           = 605 + 100

                           = 705

National savings rate = National savings / GDP * 100

                                  = 705 / 6150 * 100

                                  = 0.1146 * 100

                                  = 11.46%

     

National Saving	Private Saving	Public Saving	National Saving Rate
705	605	100	11.46%

Part: - C

Public Saving = Tax Collection - Transfer and Interest Payment – Government Purchase

                           = 1575 - 500 - 1000

                           = 75

GDP = C + I + G + NX

          = 4300 + 1000 + 1000 + 6

          = 6306

Private disposable income = GDP – Tax Collection + Transfer and Interest Payment

                                           = 6306 - 1575 + 500

                                           = 5231

Private savings = disposable income - consumption expenditure

                         = 5231 - 4300

                         = 931

National savings = Private savings + Public savings

                           = 931 + 75

                           = 1006

National savings rate = National savings / GDP * 100

                                  = 1006 / 6306 * 100

                                  = 0.1595 * 100

                                  = 15.95% or 16%

     

National Saving	Private Saving	Public Saving	National Saving Rate
1006	931	75	16%