Suppose GDP is $800 billion, taxes are $150 billion, private saving is $50 billion and public saving is $20 billion. Assuming this economy is closed, calculate consumption, government purchases, national saving and investment.
To calculate consumption, we can use the formula:
Consumption = GDP - Private Saving
Given that GDP is $800 billion and private saving is $50 billion, we can substitute these values into the formula:
Consumption = $800 billion - $50 billion
Consumption = $750 billion
So, consumption is $750 billion.
To calculate government purchases, we can use the formula:
Government purchases = GDP - Consumption - Private Saving
Given that GDP is $800 billion, consumption is $750 billion, and private saving is $50 billion, we can substitute these values into the formula:
Government purchases = $800 billion - $750 billion - $50 billion
Government purchases = $0 billion
So, government purchases are $0 billion.
To calculate national saving, we can use the formula:
National saving = Private Saving + Public Saving
Given that private saving is $50 billion and public saving is $20 billion, we can substitute these values into the formula:
National saving = $50 billion + $20 billion
National saving = $70 billion
So, national saving is $70 billion.
To calculate investment, we can use the formula:
Investment = National Saving
Given that national saving is $70 billion, we can substitute this value into the formula:
Investment = $70 billion
So, investment is $70 billion.
To summarize:
- Consumption is $750 billion.
- Government purchases are $0 billion.
- National saving is $70 billion.
- Investment is $70 billion.