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 $1,230 million. Enter the amount for government purchases. National Income Account Value (Millions of dollars) Government Purchases (GG) Taxes minus Transfer Payments (TT) 210 Consumption (CC) 600 Investment (II) 330 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)National Saving (S) =  = Y - C - GY - C - G =  = II million Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private SavingPrivate Saving =  = Y - C - TY - C - T =  = million Public SavingPublic Saving =  = T - GT - G =  = million Based on your calculations, the government is running a budget

Answer 1

The GDP of a country is total value of all the goods and services produced in that country in a year. It is given to us that the GDP of this country is 1230 million.

GDP= GG+CC+II OR

1230=GG+600+330 OR

GG= 1230-930

GG=300

1. National Savings= GDP-CC-GG

Putting values, we get

National Savings= 1230-600-300

=1230-900

National Savings= 330

3. Private saving is given by GDP − TT − CC, while Public saving is given by TT − GG.

So, Private Saving= 1230-210-600

Private Saving=420.

Public saving= 210-300= -90

D. As the Public Savings is negative, the government is running a deficit.