Question

The following table contains data for a hypothetical closed economy that uses the dollar as its currency.
Suppose GDP in this country is $800 million. Enter the amount for government purchases.
National Income Account Value (Millions of dollars)
Government Purchases (GG) 260
Taxes minus Transfer Payments (TT) 300
Consumption (CC)
Investment (II) 300
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) =
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.
Public Saving =
Based on your calculations, the government is running a budget:______. .

Answer 1

Answer and Explanation:

The computation is shown below:

Here Y denotes GDP

C Denotes the consumption

I denotes the investment

G denotes the government purchase

GDP for Closed economy:

Y = C + I + G

800 = C + 300 + 200

C = 800 - 500 = 300

Consumption (C) = $300 million

National savings = Y - C - G

= 800 - 300 - 200

= $300 million

Private savings = Y -  C - T

 = 800 - 300 - 260

= $240 million  

Public savings = T - G

= 260 - 200

= $60 million

Based on the above calculations, the government is running a budget Surplus as theT is more than G