Question

Use the following information about the open economy of Regalia to answer the question below. There...

Use the following information about the open economy of Regalia to answer the question below. There are no government transfers. (Hint: capital inflow = the value of imports (IM) minus the value of exports (X).)
GDP = $1,000 million G = $100 million
C = $850 million X = $100 million
T = $50 million IM = $125 million

What is the level of investment spending and private savings, and what are the budget balance and capital inflow?
A) Investment spending is $75 million, private savings is $100 million, the budget balance is -$50 million and capital inflow is -$25 million.
B) Investment spending is $75 million, private savings is $100 million, the budget balance is -$50 million and capital inflow is $25 million.
C) Investment spending is $75 million, private savings is $75 million, the budget balance is -$50 million and capital inflow is $25 million.

Homework Answers

Answer #1

At equilibrium we have : GDP(Y)= C + I + G + X - IM

=> I = GDP- C - G - X + IM

=> I = 1000 million - 850 million - 100 million - 100 million + 125 million = 75 million

Hence, Investment = $75 million

Private Saving = Y - C - T =  1000 million - 850 million - 50 million = 100 million

Hence, Private saving = $100 million

Public saving(or budget balance) = T - G 50 million - 100 million = -50 million

Hence, budget balance = -$50 million.

Net exports(NX) = X - IM = 100 million - 125 million = -25 million.

Net capital inflow = -NX = -(-25 million) = 25 million.

Hence, capital inflow = 25 million

Hence, the correct answer is (B) Investment spending is $75 million, private savings is $100 million, the budget balance is -$50 million and capital inflow is $25 million.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Use the following information about the economy of Guyana in 2018 to answer the below question...
Use the following information about the economy of Guyana in 2018 to answer the below question (NOTE - values are in Guyanese dollars): 2018 GDP - $689 billion 2018 Taxes - $117 billion 2018 Investment - $345 billion 2018 Government Spending - $144 billion 2018 Consumption - $454 billion What was the value of net capital inflow in 2018?  (You can assume no transfer payments.) (Answers should be in the form "Z billion."  Just enter "Z.")
Question 1: Use the following information about the economy of Guyana in February 2020 to answer...
Question 1: Use the following information about the economy of Guyana in February 2020 to answer the below question (NOTE - values are in Guyanese dollars): Deposits in checking accounts - $133 billion Deposits in savings accounts - $210 billion Deposits in other, illiquid accounts - $112 billion Small time deposits - $9 billion Currency - $116 billion Bank reserves - $92 billion What is the value of M2 in Guyana for February 2020? (Answers should be in the form...
1. In 2001, the economy of the United Kingdom exported goods worth £192 billion and services...
1. In 2001, the economy of the United Kingdom exported goods worth £192 billion and services worth another £77 billion. It imported goods worth £225 billion and services worth £66 billion. Receipts of income from abroad were £140 billion while income payments going abroad were £131 billion. Government transfers from United Kingdom to the rest of the world were £23 billion, while various U.K. government agencies received payments of £16 billion from the rest of the world. IF VALUE IS...
1.Use the following information to answer the question(s) below. Suppose that the market portfolio is equally...
1.Use the following information to answer the question(s) below. Suppose that the market portfolio is equally likely to increase by 24% or decrease by 8%. Security "X" goes up on average by 29% when the market goes up and goes down by 11% when the market goes down. Security "Y" goes down on average by 16% when the market goes up and goes up by 16% when the market goes down. Security "Z" goes up on average by 4% when...
Part 1 Consider the table below. All data are for 2004 and are in billions of...
Part 1 Consider the table below. All data are for 2004 and are in billions of dollars, except the CPI, which is a percentage. Capital Consumption Allowance $ 1,435.3 Billion Consumer Spending $ 8,214.3 Billion Corporate Income Taxes $ 360.1 Billion CPI (2004) 105.0 Dividends $ 200.3 Billion Exports $ 1,173.8 Billion Factor Income Payments made to Foreign Entities $ 361.7 Billion Factor Income Receipts from Foreign Entities $ 415.4 Billion Government Spending $ 2,215.9 Billion Gross Private Domestic Investment...