Question

National Income and Product Accounts		Balance of Payments Accounts
Consumption	1100	Capital account	50
Investment	800	Domestic income payments to foreign factors	400
Government spending	200	Net unilateral transfers	-8
Net taxes collected	150	Trade balance	-80
Gross national income	1800

The above table represents data for TTYL during 2015. The values are in millions of dollars. Answer the following questions accordingly.

1. What is the value of gross national expenditure?
2. What is the value of gross domestic product?
3. What is the value of foreign income payments to domestic factor services?
4. What is the value of current account for TTYL?
5. What is the value of gross national disposable income?
6. What is the value of national saving in TTYL?
7. [6 points] During the next year, 2016, TTYL experienced an increase in investment spending, and at the same time, the government budget went from a deficit to surplus. All else equal, how would these two changes affect the current account balance? Explain why.

Answer 1

a. gross national expenditure = consumption + investment + government expenditure = 1100+800+200 = 2100

b.  gross domestic product = consumption + investment + government expenditure + net exports(trade balance)= 1100+800+200+ (-80) = 2020

c) foreign income payments to domestic factor services:

GNP = GDP + net factor income from abroad

1800 = 2020 + net factor income from abroad

net factor income from abroad = 1800 - 2020 = (-220)

net factor income from abroad = foreign income payments to domestic factor services - Domestic income payments to foreign factors

so, (-220) = foreign income payments to domestic factor services - 400

foreign income payments to domestic factor services = (-220) + 400 = 180

d) current account = Net unilateral transfers + trade balance + net factor income from abroad

= -8 -80 -220 = (-308)

f) gross national disposable income = GNI - Taxes = 1800 - 150 = 1650

g) national savings = private savings + public savings

private savings = GNI - taxes - consumption =1800-150-1100 = 550

public saving = taxes - government expenditure = 150 - 200 = -50

national savings = 550-50 = 500