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The following table contains data for a hypothetical closed economy that uses the dollar as its currency
The following table contains data for a hypothetical closed economy that uses the dollar as its currency. Suppose GDP in this country is $1,330 million. Enter the amount for consumption.
| National Income Account | Value (Millions of dollars) |
| Government Purchases (G) | 350 |
| Taxes minus Transfer Payments (T) | 455 |
| Consumption (C) | |
| Investment (I) | 280 |
Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table.
National Saving (S)=$ _____ million
Complete the following table by using national income accounting identities to calculate private and public savings. In your calculations, use data from the initial table
Private Saving =$ _____ million
Public Saving =$ _____ million
Based on your calculations, the Government is running a budget _____ (deficit/surplus)
Expert Solution
- We know that Y = C+ I +G. Hence, C = Y - I - G = 700
| National Income Account | Value (Millions of dollars) |
| Government Purchases (G) | 350 |
| Taxes minus Transfer Payments (T) | 455 |
| Consumption (C) | 700 |
| Investment (I) | 280 |
- National Saving (S)= Private Savings + Public Savings = (Y-C- T) + (T-G) = $280million; where G = Government purchases and T = Taxes minus Transfer payments.
- Private Saving = Y - C - T = $175million
- Public Saving= T - G =$105 million
- The Government is running a budget surplus because T>G
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