Question

You are given the following information about an economy:

I = 40, G = 30, GNP = 200, CA = -20, T = 60, TR = 25, INT = 15, Factor income received from rest of world = 7, Factor payments made to rest of world = 9.
Find the following, assuming that government investment is zero (that s, the amount 30 for G is all for government consumption) and that all INT goes to domestic households.
a) NX
b) NFP
c) GDP
d) Personal consumption
e) Private saving
f) Government saving
Government budget deficit
National saving

Answer 1

To find the required values, we use the given information and formulas for each variable. Net Exports (NX) is 70, Net Factor Payments (NFP) is -2, GDP is 198, Personal consumption is 118, Private saving is 13, Government saving is 55, National saving is 68, and Government budget deficit is 15.

Step-by-step explanation:

To find the values asked for, we first need to understand the definitions of the given variables:

• NX (Net Exports) = Exports - Imports
• NFP (Net Factor Payments) = Factor income received from rest of world - Factor payments made to rest of world
• GDP (Gross Domestic Product) = GNP (Gross National Product) + Net Factor Payments
• Personal consumption = GDP - (NX + G + CA)
• Private saving = GDP - (NX + G + T + TR)
• Government saving = T + TR - G
• National saving = Private saving + Government saving
• Government budget deficit = T + TR - G - I

Using the given values, we can now calculate the required values:

• NX = 50 - (-20) = 70
• NFP = 7 - 9 = -2
• GDP = 200 - 2 = 198
• Personal consumption = 198 - (70 + 30 - 20) = 118
• Private saving = 198 - (70 + 30 + 60 + 25) = 13
• Government saving = 60 + 25 - 30 = 55
• National saving = 13 + 55 = 68
• Government budget deficit = 60 + 25 - 30 - 40 = 15