2. Saving and investment in the national income accounts The following table con

Question

2. Saving and investment in the national income accounts The following table contains data for a hypothetical cdlosed economy that uses the dollar as its currency. Suppose GDP in this country is $1,680 million. Enter the ambunt for government purchases Value (Millions of dollars) National Income Account Government Purchases (G) Taxes minus Transfer Payments (T) Consumption (C) Investment (/) 360 1,000 280 Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S) = - million

Explanation / Answer

Calculate Government Purchases (G) -

G = GDP - Consumption - Investment

G = $1,680 million - $1,000 million - $280 million

G = $480 million

The government purchases (G) is $480 million.

National Saving = Y - C - G

National Saving = $1,680 million - $1,000 million - $480 million

National Saving = $200 million

The National Saving is $200 million.

Private Saving = Y - C - T

Private Saving = $1,680 million - $1,000 million - $360 million

Private Saving = $320 million

The Private Saving is $320 million.

Public Saving = T - G

Public Saving = $360 million - $480 million

Public Saving = -$120 million

The Public Saving is -$120 million

Negative public saving indicates deficit.

So,

The government is running a budget deficit.

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