Question

Your economy’s national income accounting statistics are given below. Use this information to calculate the values for government purchases (G), private domestic saving (S), and investment (I). Show all your work.

national income       Y    =  11,500              

budget surplus        BuS   =  ‐1,470

disposable income    YD =    9,450              

net exports               NX   =  ‐ 730

consumption               C   =    7,540

Answer 1

Points to note:

• Disposable income is the income remaining with the consumer after he has paid the taxes. So, Yd = Y - T
• Budget surplus is the excess of government expenditure over its income. So, BS= T - G
• The disposable income of the consumer is either consumed or saved (Private saving). So, Yd =C + S

• National savings is public saving + private savings.
• And, lastly, national saving - Investment =net exports. So, NX = S + (T-G) - I