Question

7. Saving and investment in the national Income accounts The following table contains data for a hypothetical closed economy that uses the dollar as its currency Suppose GDP in this country is $1,250 millin. Enter the amount for government purchases Value National Income Account(Millions of dollars) Government Purchases (G) Taxes minus Transfer Payments (T) Consumption (C) Investment (T) 300 625 375 Complete the following table by using national income accounting identities to calculate national saving. In your caiculations, use data from the preceding table. National Saving (S)

Answer 1

Solution:-

Y = $1,250 million

For a closed economy, Y = C + I + G

1250 = 625 + 375 + G

1250 = 1000 + G

G = 1540 - 1000 = $250 million

National Savings = Income - Consumption - Government purchases

= 1250 - 625 - 250 = $375 million