In a closed economy, GDP is $1000, government purchases are $200, and consumption is $700. If the government has a budget surplus of $25, what are investment, taxes, private saving, public saving, and national saving?

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Nestor RutherfordLv2

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a) Write down the national account identity for a closed economy. Then, show the identity between national savings (i.e. the sum of private savings and government savings) and investment. You must show all of the steps.

b) Write down the national account identity for an open economy. Again, show the identity between national savings (i.e. the sum of private savings and government savings) and investment. Show all of your steps.

c) Based on the saving and investment relationship in the closed economy in part a), explain how an increase in government purchases (G) can affect growth in output per worker. We assume that the taxes that the government collects remain unchanged.

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Calculate private disposable income, private sector saving, government saving, national saving, and the government decit. Is the government in a budget surplus or decit?

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In a closed economy, GDP is $1000, government purchases are $200, and consumption is $700. If the government has a budget surplus of $25, what are investment, taxes, private saving, public saving, and national saving?

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