Assume the GDP is $6,000, private domestic savings are $1,100, and the government budget deficit is $200. Consumption is $3,800, and the trade deficit is $100.
Find: (a) Investments (I), (b) Government spending (G)
Answer
Private saving=Y-T-C
1100=6000-T-3800
T=$1100
Public saving=(T-G)=budget surplus-budget deficit
-200=T-G
-200=1100-G
G=1300
The government spending is $1300
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b)
Y=C+I+G+NX
NX=net export =trade surplus =- trade defict =-100
6000=3800+I+1300-100
I=6000-5000=1000
the investment is $1000
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