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 closed economy that uses the dollar as its currency. Suppose GDP in this country is $1,680 million. Enter the amount for consumption Value National Income Account(Millions of dollars) Government Purchases (G) Taxes minus Transfer Payments (T) Consumption (C) Investment (I) 400 360 280 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

Question 2

Consumption = GDP - Government purchases - Investment

Consumption = $1,680 million - $400 million - $280 million

Consumption = $1,000 million

The consumption is $1,000 million

National saving (S) = Y - C - G

National saving (S) = I

National saving = $1,680 million - $1,000 million - $400 million = $280 million

The national saving is $280 million

Private Saving = Y - C - T

Private Saving = $1,680 million - $1,000 million - $360 million = $320 million

The private saving is $320 million.

Public saving = T - G

Public saving = $360 million - $400 million = -$40 million

The public saving is -$40 million

Negative public saving indicates deficit.

So,

The government is running a budget deficit.

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