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Suppose GDP in this country is [tex]$\$ 950$[/tex] million. Enter the amount for government purchases.

Value | National Income Account (Millions of dollars)
---|---
Government Purchases [tex]$(G)[tex]$[/tex] | 1,975
Taxes minus Transfer Payments [tex]$[/tex](T)$[/tex] | 325
Consumption [tex]$(C)$[/tex] | 500
Investment [tex]$(I)$[/tex] | 200

Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table.

[tex]
\text { National Saving } \begin{aligned}
(S) & =\frac{Y - C - G}{Y} \\
& = \square
\end{aligned}
[/tex]

Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table.

[tex]
\begin{aligned}
\text { Private Saving } & =Y - T - C \\
& = \square
\end{aligned}
[/tex]

[tex]
\begin{aligned}
\text { Public Saving } & =T - G \\
& = \square
\end{aligned}
[/tex]

Based on your calculations, the government is running a budget [tex]\square[/tex].



Answer :

GinnyAnswer
Let's break down the solution step by step. We'll use the given data and national accounting identities to find national saving, private saving, public saving, and the budget status.

### Given Data:
- Gross Domestic Product (GDP), [tex]\( Y \)[/tex]: \[tex]$950 million - Government Purchases, \( G \): \$[/tex]1,975 million
- Taxes minus Transfer Payments, [tex]\( T \)[/tex]: \[tex]$325 million - Consumption, \( C \): \$[/tex]500 million
- Investment, [tex]\( I \)[/tex]: \[tex]$200 million ### 1. Calculating National Saving \( S_n \): National saving \( S_n \) can be calculated by the formula: \[ S_n = Y - C - G \] Substituting the given values: \[ S_n = 950 - 500 - 1975 \] \[ S_n = 950 - 500 = 450 \] \[ S_n = 450 - 1975 = -1525 \] So, National Saving is \(\$[/tex] -1525\) million.

### 2. Calculating Private Saving [tex]\( S_p \)[/tex]:

Private saving [tex]\( S_p \)[/tex] can be calculated by the formula:
[tex]\[ S_p = Y - T - C \][/tex]

Substituting the given values:
[tex]\[ S_p = 950 - 325 - 500 \][/tex]
[tex]\[ S_p = 950 - 825 = 125 \][/tex]

So, Private Saving is [tex]\(\$ 125\)[/tex] million.

### 3. Calculating Public Saving [tex]\( S_{gov} \)[/tex]:

Public saving [tex]\( S_{gov} \)[/tex] can be calculated by the formula:
[tex]\[ S_{gov} = T - G \][/tex]

Substituting the given values:
[tex]\[ S_{gov} = 325 - 1975 \][/tex]
[tex]\[ S_{gov} = -1650 \][/tex]

So, Public Saving is [tex]\(\$ -1650\)[/tex] million.

### 4. Determining the Budget Status:

The budget status depends on the value of public saving:
- If [tex]\( S_{gov} \)[/tex] is positive, the government is running a budget surplus.
- If [tex]\( S_{gov} \)[/tex] is negative, the government is running a budget deficit.

Since [tex]\( S_{gov} = -1650 \)[/tex], the government is running a budget deficit.

### Summary Table:

| Metric | Value (\[tex]$ Million) | |-------------------|--------------------| | National Saving | -1525 | | Private Saving | 125 | | Public Saving | -1650 | | Budget Status | Deficit | So based on these calculations, the government purchases are \$[/tex]1975 million, the national saving is \[tex]$-1525 million, private saving is \$[/tex]125 million, public saving is \$-1650 million, and the government is running a budget deficit.

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