Question

Suppose Japan has a GDP of $2 trillion, and its national saving rate is 16%. Assume Japan is an open economy. If Japan's net exports are 3% of GDP, Japan's investment is...

Answer 1

Japan's investment can be calculated by subtracting its net exports from its total savings, leading to an investment figure of $260 billion.

Step-by-step explanation:

The student is asking to calculate Japan's investment given its GDP, national saving rate, and net exports as a percentage of GDP. To find the investment, we can use the identity that in an open economy, savings equal investment plus net exports. First, we calculate the total savings in Japan by taking 16% of its $2 trillion GDP, which gives us $320 billion in savings. Since net exports account for 3% of the GDP, that equates to $60 billion. Using the formula, if Japan's total savings are $320 billion and net exports are $60 billion, then investment would be the difference between the two, so Japan's investment would be $320 billion - $60 billion = $260 billion.