Question

Suppose Japan has a GDP of $5 trillion, and that its national savings rate is 25%. Assuming Japan is an open economy, i. Calculate Japan’s investment if net exports are 1% of GDP ii. Calculate Japan’s exports if imports are valued at $650 billion.

Answer 1

Since Japan has a GDP of $5 trillion,

and that its national savings rate is 25%.

and Japan is an open economy.

i. National Saving= 25% of $5 trillion

=0.25*$5 trillion

=$1.25 trillion

Since National saving is equal to the Investment.

Hence the investment is $1.25 trillions.

ii.

Net exports are 1% of GDP

Net export= 1% of $5 trillion

Net export=0.01*$5 trillion

=$0.05 trillons

Since 1 trillions = 1000 billions

Hence Net export is = 0.05*1000 billion

=$50 billion

Japan’s exports if imports are valued at $650 billion

Net export= Export - import

$50 billion= Export - 650 billion

Export=50+650

=$700 billions.