Question

Consider the following data for a closed economy: Y = $15 trillion C = $9 trillion 1 = $3 trillion TR = $1 trillion T = $2 trillion Use the data to calculate the following. (Enter your responses as integers.) a. Private saving: $ trillion. b. Public saving: $ trillion. c. Government purchases: $ trillion. 171 SF- d. The government budget balance is $ trillion and as a result the government budget is in

Answer 1

(a) Private saving = Y-T+TR-C

= $(15-2+1-9) trillion = $ 5 trillion

(b) National saving = I= $3 trillion

Public saving= National saving - Private saving

= $(3 - 5) trillion = -$2 trillion

(c) And we know that,Public saving = T-G-TR

-$2 trillion = $(2- G- 1) trillion

G = $(1 +2 ) trillion

G = $3 trillion

(d) The government budget balance is (T-G-TR) = $(2-3-1) = -$2 trillion and as a result the government budget is in deficit because it is negative.