Question

4 Suppose GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 trillion, and public saving is $0.2 trillion. Assuming this economy is closed, calculate consumption, government purchases, national saving, and investment.

Answer 1

Answer

Private saving=Y-T-C=0.5

8-1.5-C=0.5

C=6.5-0.5

C=6 trillion

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Public saving=T-G=0.2

T-G=0.2

T=1.5

G=1.5-0.2

G=1.3 trillion

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National saving=Y-C-G=National saving =PS+PS=0.5+0.2=0.7

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Y=C+I+G

8=6+I+1.3

I=0.7 trillion =national saving.

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consumption is 6 trillion

govenment purcahse is 1.3 trillion

national saving and investment is same and it is 0.7 trillion