Question

 In each part that follows, use the economic data given to find national saving, private saving, public saving, and the national saving rate.

 a. Household saving = 200 Business saving = 400

 Government purchases of goods and services =100

 Government transfers and Interest payments = 100

 Tax collections = 150 GDP = 2,200

 Instructions: Enter your response for the national saving rate rounded to one decimal place. If you are entering any negative numbers, be sure to Include a (-) In front of those numbers.

 b. GDP = 6,000 Tax collections =1,200

 Government transfers and Interest payments = 400

 Consumption expenditures = 4,500

 Government budget surplus =100

 Instructlons: Enter your response for the national saving rate rounded to one decimal place. If you are entering any negative numbers, be sure to Include a (-) In front of those numbers.

 c. Consumption expenditures = 4,000 Investment = 1,000

 Government purchases =1,000 Net exports = 0

 Tax collections = 1,500

 Government transfers and Interest payments =500

 Instructlons: Enter your response for the national saving rate rounded to one decimal place. If you are entering any negative numbers, be sure to Include a (-) In front of those numbers.

Answer 1

Solution:-

(A) Public saving = government budget surplus

                      = tax collections – government purchases – transfers and interest payments

         = 150 – 100 - 100

          = -50

Private saving = Household saving + business saving

                        = 200 + 400

                        = 600

National saving = Private saving + public saving

                         = 600 – 50

                         = 550

National saving rate = National saving / GDP

                                = 555 / 2,200

                                = 25%

(B) Private income = GDP - Taxes + Transfers

                               = 6000 - 1200 + 400

                               = 5200

Private savings = income - consumption

                         = 5200 - 4500

                         = 700

Public savings = Govt budget surplus = 100

National savings = Private savings + Public savings

                           = 700 + 100

                           = 800

National savings rate = National savings / GDP * 100

                                   = 800 / 6000 * 100

= 13.33%

(C) GDP = C + I + G + NX

              = 4,000 + 1,000 + 1,000 + 0

              = 6,000

Government savings = Taxes - Transfers - Government spending

                                         = 1,500 - 500 - 1,000

                                         = 0

Private sector disposable income = GDP - Taxes + Transfers

                                                                 = 6,000 - 1,500 + 500

                                                                = 5000

Private sector savings = disposable income - consumption

                                            = 5,000 - 4,000

                                            = 1000

National savings = Private savings + Government savings

                                 = 1000 + 0

                                 = 1,000

National savings rate = National savings / GDP = 1,000 / 6,000 = 16.67 percent