Answer to Question #202559 in Macroeconomics for Natasha

Question

Suppose GDP is Rs.10.3 trillion, taxes are Rs.1.8 trillion, private saving is Rs.1.2 trillion, and public saving is Rs.0.2 trillion. Assuming this economy is closed, calculate

Answer 1

Private savings= GDP-taxes-consumption

1.2= 10.3$-$ 1.8-consumption

Consumption= 10.3$-$ 1.8$-$ 1.2 = 7.3

National savings = public + private savings

= 1.2+0.2 = 1.4

NOW,

National savings = GDP$-$ Consumption- govt purchases

1.4 = 10.3 $-$ 7.3 =govt purchases

Govt purchases = 10.3$-$ 7.3$-$ 1.4 = 1.6

Now we know

GDP = C + I + G

10.3 = 7.3 + I + 1.6

I = 10.3-7.3$-$ 1.6 = 1.4