Scenario 26-A. Assume the following information for an imaginary, closed economy. GDP = $110,000 Consumption =...

Scenario 26-A. Assume the following information for an imaginary, closed economy. GDP = $110,000 Consumption = $70,000 Private Saving = $8,000 National Saving = $12,000

1. Refer to Scenario 26-A. For this economy, what is the tax amount? Show your work.

2. Refer to Scenario 26-A. For this economy, investment is what amount? .

3 Refer to Scenario 26-A. In this economy is the government running a Surplus or Deficit and what is the amount?

4. Refer to Scenario 26-A. For this economy, government purchases are what amount? Show your work.

Expert Solution

We have GDP = $110,000 Consumption = $70,000 Private Saving = $8,000 National Saving = $12,000

1. For this economy, the tax amount is computed from consumption and private saving

Private saving = Y - C - T

8000 = 110,000 - 70000 - Taxes

Taxes = 32000

2. Investment I = national saving = 12000

3 Since private saving is 8000 and national saving is 12000, public saving is 12000 - 8000 = 4000. Hence there is a budget surplus of 4000.

4. Government purchases is Public saving = T - G

4000 = 32000 - G

Government purchases = 32000 - 4000 = 28000.

Rahul Sunny answered 2 years ago

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