Final answer:
The government's budget deficit in a closed economy with $2100 equilibrium output/income, $350 spending, and $50 taxes would be $300. Similarly, using the national saving and investment identity, the current account balance with a $100 billion budget deficit, $1,500 billion savings, and $1,600 billion investment would be negative $100 billion. If investment increases by $50 billion, the deficit would become negative $150 billion.
Step-by-step explanation:
The student is asking about the size of a government's budget deficit in a closed economy. If a closed economy has an output and income of $2100 in equilibrium, the government spends $350, and imposes a lump-sum tax of $50, the deficit is calculated by subtracting the tax revenue from the government spending. So, the government's budget deficit would be the spending ($350) minus the taxes ($50), which equals $300.
Using this logic and relating to the reference information given in the exercise, for question 44, if a government budget deficit is $100 billion, total domestic savings are $1,500 billion, and total physical capital investment is $1,600 billion, the current account balance would be negative $100 billion (since investment exceeds saving by this amount). If the investment rises by $50 billion, with the other factors remaining the same, the current account deficit would then be negative $150 billion.