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(a) Assume that Y = 5,000, DI = 4,100, BD = 200, C =3,800 and NX...

(a) Assume that Y = 5,000, DI = 4,100, BD = 200, C =3,800 and NX = -100, where Y is GDP, DI is disposable income, BD is government’s budget deficit, C is consumption spending and NX is next exports. Find the values for saving (S), investment (I) and government spending (G) in this economy.

(b) If a country has a trade deficit, its government must necessarily have a budget deficit. True or false? Explain.

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