Question

Consider the following data for a closed economy:

Y = $12 trillion C = $ 8 trillion G = $ 2 trillion Public Saving = -$0.50 trillion

Use the data to calculate the following.

a) Net Taxes (T)

b) Private Saving

c) Investment

d) Government budget surplus or deficit

Answer 1

a) Net Taxes (T)

Public saving=T-G

-0.5=T-2

T=-0.5+2

T=1.5 trillion

the taxes is $1.5 trillion

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b) Private Saving

Private saving=Y-T-C

=12-1.5-8

=2.5

the private saving is $2.5 trillion

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c)

I=Y-C-G

=12-8-2

=$2 trrillion

Investment is $2 trillion

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d)

Budget surplus =T-G

=1.5-2

=-0.5 trillion

=public saving

=budget defict

as the budget surplus is negative so it is budget deficit