4. assume that GDp is $6,000, personal disposable income is $5,100, and the government budget deficit is $200. Consumption is $3,800, and the trade deficit is $100. a. how large is saving (S)? b. how large is investment (I)? c. how large is government spending (G)?
(a) Saving equals to the government savings plus private savings:
Private savings equals to disposable income minus consumption:
The GS equals -$200 (the government spent more than it earned) so we can find saving:
(b)-(c) Let's first find the government spending (G). From the condition of the question we know that the government budget deficit is $200:
We can find taxes (T) as follows:
Then, we can find government spending:
Finally, we can find the investment as follows:
Comments
Leave a comment