Question

The following table shows the National Income and Product Account of the United States and the...

The following table shows the National Income and Product Account of the United States and the Consolidated Government Account one decade ago, in 2007.

           U.S. National Income Account and Consolidated Government Account, 2007

                                                           (In billions of dollars)

______________________________________________________________________________

                                                                                                                                                                                                                        2007

______________________________________________________________________________

Summary National Income and Product Accounts

Gross National Product (GNP)                                                                                                                                              13,937

Private Consumption                                                                                                                                                                          9,734

Private Investment                                                                                                                                                                             2,125

Government Spending                                                                                                                                                              2,689

                                                                                                                                    Govt. consumption            2,221

                                                                                                                                    Govt. investment               468

Current Account Balance (excludes unilateral transfers)                                                         -611

Government Consolidated Budget

Government Revenues                                                                                                                                                                       4,213

Government Outlays (includes govt. spending plus                                                                                      4,633

            transfer payments and other expenditures

______________________________________________________________________________

Source: U.S. Department of Commerce.

(A) How much was U.S. absorption in 2007? As a proportion of GNP, was absorption in 2007 greater or lower than in 2016 (using the data presented in class)? Please explain your calculations.

(B) As a fraction of GNP, how does the current account balance (excluding unilateral transfers) in 2007 compare with that in 2016 (as presented in class)? What are the economic implications of this change?

(C) How much, as a fraction of GNP, was the budget balance in 2007? Did the budget balance deteriorate or improve between 2007 and 2016 (using the data presented in class), as a fraction of GNP? By how much? Explain.

(D) Break down the current account balance (as a fraction of GNP) into its national savings and investment components (as a fraction of GNP). What were the changes between 2007 and 2016 (as presented in class)? What accounts for the changes in the current account balance: changes in savings or changes in investment or both? Explain.

Please provide articals or reserchs that supplement your answer

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Homework Answers

Answer #1

Absorption = GNP - Current account balance

Absorption = 13937 -+ 611 = 14548

I do not have the 2016 data so can't really comment on that however I will solve the other parts as well.

2.) The ratio is 0.0438 but the 2016 data again is unavailable so can't really compare.

3) Budget balance = govt revenue - govt outlays = 4213 - 4633 = -420

As a proportion of GNP it would be 420/13937 = 0.03

4) CA = -611. Total investment in the economy = 2125+468 = 2593. Savings = CA + Investment = -611 + 2593 = 1982. As a proportion of GNP, savings = 0.1422, investment = 0.186.

Again the data for 2016 is not available so I can't comment on that, but I am sure you will be able to.

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