Question

ECO 252 - Macroeconomics

In a closed economy (in equilibrium), assume that real GDP is $15 trillion, government purchases are $1.3 trillion, public saving is $0.5 trillion, and national saving is $2.2 trillion. Calculate the following: 

a. Taxes

b. Consumption

c. Investment

d. Private saving

e. The government budget deficit or surplus.Precise which one.

Answer 1

4.) In a closed economy (in equilibrium),

the real GDP is $15 trillion,

government purchases are $1.3 trillion,

public saving is $0.5 trillion,

national saving is $2.2 trillion.

(a)

Taxes= Public saving + government expenditure

=$0.5 trillion+$1.3 trillion

=$1.8 trillion

(b)

Consumption= Real GDP - Investment - Government expenditure

=$15 trillion -$2.2 trillion -$1.3 trillion

=$11.5 trillion

(c)

National saving= Investment= $2.2 trillion

(d) Private saving = national saving - public saving

=$2.2 trillion - $0.5 trillion

=$1.7 trillion

(e)

Budget surplus/ deficit= Taxes - government expenditure

=$1.8 trillion- $1.3 trillion

Budget surplus​ because (T>G) =$0.5 trillion