Question

# Complete the following table, then do the complete circular flow diagram for the first row of...

Complete the following table, then do the complete circular flow diagram for the first row of the table. You cannot assume a balanced economy due to a trade imbalance, you may however assume no government deficit or surplus.(each row is independent)

 Y C I G T S NX NCO 8000 2100 600 600 750 4500 1700 600 400

Working notes:

(i) Y = C + I + G + NX

(ii) Private saving (S) = Y - C

(iii) Public saving (Sp) = T - G

(iv) Total saving (St) = S + Sp = (Y - C) + (T - G)

(v) (S - I) = NX

(vi) NCO = NX

Therefore:

(1) When Y = 8000,

(a) NX = NCO = 750

(b) Therefore,

8000 = C + 2100 + 600 + 750

8000 = C + 3450

C = 4550

(c) S = Y - C = 8000 - 4550 = 3450

(2) When Y = 4500,

(a) 4500 = 1700 + 600 + G + 400

4500 = 2700 + G

G = 1800

(b) S = Y - C = 4500 - 1700 = 2800

(c) NCO = NX = 400

(d) NX = (Y - C) + (T - G) - I

400 = 2800 + T - 1800 - 600

400 = 400 + T

T = 0

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