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Consider an economy with total GDP of $15 trillion, total household consumption of $10 trillion, total...

Consider an economy with total GDP of $15 trillion, total household consumption of $10 trillion, total government spending of $3 trillion, imports of $4 trillion and exports of $3 trillion. The net factor payments households receive is $0.2 trillion, and the total taxes paid to the government are $2 trillion.

3.1 Calculate the total private investment in this economy.

3.2 Calculate gross national product.

3.3 Calculate the total national saving.

3.4 Calculate the current account surplus

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Answer #1

1. GDP = C + I + G + X - IM.

$15 = $10 + I + $3 + $3 -$4.

$15 = $12 + I

I = $15 - $12.

I = $3 trillion.

Private investment (I) = $3 trillion.

2. GNP = GDP + Net income earned by household - Net income earned by foreigner.

GNP = $15 + $0 - $0.2

GNP = $14.8 Trillion.

3. National Saving = GDP - Consumption - Government Spending.

National Saving = $15 - $10 - $3.

National Saving = $2 trillion.

4. Current Account Surplus = Export - Import.

Current Account Surplus = $3 - $4.

Current Account Surplus = -$1 trillion.

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