MINDTAP Homework (Ch 13) 2. Saving and investment in the national income The fol

Question

MINDTAP Homework (Ch 13) 2. Saving and investment in the national income The folowing table contains data for a hypothetical dosed economy that uses the dollar as its currency. Suppose GOp in this country is $1,175 million. Enter the amount for consumption (Millions of dellars) Notional Income Account Govemment Purchases (C) Taxes minus Transfer Payments (T) investment ( Complebe the felowing table by using national ancome accounting identees to calculate national saving. In your calcuilations, use data from the preceding table. National Sasring (S)- Complete the following table by using national income accounting identties to calouiate private and public saving. In your caluilaions, use data from O Type here to search ?? 6 7

Explanation / Answer

Solution: All the figures are in millions of dollars

Real GDP, Y = 1,175

Government expenditure, G =250

Investment, I = 300

Net Tax Revenue, NTR= 225

We know, Y= C +G +I

1175 = C +250 +300

Consumption, C=625 million dollars

National savings= national investment OR Y-C-G = 300 million dollars

Private savings = Y-C-NTR

= 1175- 625 - 225 = 325 million dollars

Public savings = NTR - G

= 225-250 = - 25million dollars

Since, public savings is negative, government is facing budget deficit.

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