Question

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

Suppose GDP in this country is $320 million. Enter the amount for government purchases.

National Income Account	Value
	(Millions of dollars)
Government Purchases (GG)
Taxes minus Transfer Payments (TT)	110
Consumption (CC)	150
Investment (II)	70

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)	=  =
	=  =
		million

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	=  =
	=  =	million

Public SavingPublic Saving	=  =
	=  =	million

Based on your calculations, the government is running a budget .

Answer 1

Y=C+I+G

Y= $320

C= $ 150

G= ?

Substituting in the above equation:

$320=$150 + 70 + G

$320=$220+G

IG= $320-$220 = $100

Private savings = Y-C-T

              T (Taxes = $110)

= $320 -$150-$110 = $60

Public savings = T-G

G-$100

$110 - $100 = $10.( Budget surplus)

National savings = Private savings + Public savings = $60 +$10 = $70.