13.0k views
2 votes
Consider the following data for a closed economy: Y = $15 trillion C = $7 trillion 1= $2 trillion TR = $1 trillion T= $2 trillion Use the data to calculate the following. (Enter your responses as integers.) a. Private saving: $7 trillion. b. Public saving: $ trillion. c. Government purchases: $ trillion. d. The government budget balance is $ trillion and as a result the governmerit budget is in surplus

2 Answers

7 votes

a. Private Saving: $6 trillion

b. Public Saving:
\(S_g = 2 - 1 - G = 1 - G\)

c. Government Purchases:
\(G = 2 - 1 - S_g = 1 - S_g\)

d. The government budget balance is 2 - G trillion, and as a result, the government budget is in surplus or deficit depending on the value of G.

Given:

- Y (GDP) = $15 trillion

- C (Consumption) = $7 trillion

- I (Investment) = $2 trillion

- TR (Transfer Payments) = $1 trillion

- T (Taxes) = $2 trillion

Calculations:

a. Private Saving:

Private Saving
(\(S_p\)) is given by the formula:


\[S_p = Y - C - T\]


\[S_p = 15 - 7 - 2\]


\[S_p = 15 - 9\]


\[S_p = 6\]

b. Public Saving:

Public Saving
(\(S_g\)) is given by the formula:


\[S_g = T - TR - G\]


\[S_g = 2 - 1 - G\]

c. Government Purchases:

Government Purchases (G) can be calculated using the equation for the government budget balance:


\[G = T - TR - S_g\]


\[G = 2 - 1 - S_g\]

d. Government Budget Balance and Status:

The government budget balance is the difference between government spending (G) and government revenue (T):


\[Budget \ Balance = T - G\]


\[Budget \ Balance = 2 - G\]

User Xsveda
by
8.7k points
5 votes

a. Private savings = $7 trillion.

b. Public savings = $0

c. Government purchases = $1

d. Budget balance = $0

a) Private savings = Y - C - T + TR

= 15 - 7 - 2 + 1

= 7

Private savings = $7 trillion.

b. Y = C + I + G

15 = 7 + 7 + G

G = 15 - 14

G = 1

Government purchases = $1

Public savings = T - G - TR

= 2 - 1 - 1

= 0

Public savings = $0

d) Budget balance = T - G - TR = 2 - 1 - 1 = $0

So, because the budget balance is zero, this means that the government budget is balanced.

User Kinsley
by
8.3k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.