Suppose GDP in this country is $780 million. Enter the amount for investment.

National Income Account Value (Millions of dollars)
Government Purchases ( G ) 200
Taxes minus Transfer Payments ( T ) 260
Consumption ( C ) 300
Investment ( I )

Complete the following by using national income accounting identities to calculate national saving. In your calculations, use data from the previous table.
National Savings (S) =

Complete the following by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table.
Private Saving =

Based on your calculations, the government is running a budget .

Answers are given in the Explanation.

Explanation:

A closed economy does not trade with the rest of the world, and, thus, its net exports are zero. Therefore, in this case, GDP is the sum of consumption, Investment, and Government purchases. To find the missing value of Investment, the national income accounting identity can be rearranged as follows:

GDP = C+I+G

I = GDP - C - G

= 780 - 300 -200

=$280

National Saving is the total income in the economy that is left over after paying for consumption and government purchases. In a closed economy, subtracting consumption and government purchases from GDP also yields investment spending, so national Saving equals Investment:

National Saving (S) = GDP−C−G

=780 - 300 -200

=$280 = Investment (I)

Private Saving is the income that remains after households pay taxes and make consumption expenditures:

Private Saving = GDP−C−T

=780 - 300 -260

=$220

Public Saving is the amount of tax revenue that the government has left over after paying for its spending:

Public Saving = T−G =260 - 200

= $60 million

Based on your calculations, the government is running a budget surplus.

When a government spends less than it collects in tax revenues, it runs a government budget surplus. Public Saving is positive in the case of a budget surplus.

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