Question

In each part that follows, use the economic data given to find national saving, private saving, public saving, and the national saving rate.
a.
Household saving 200
Business saving 400
Government purchases of goods and services 160
Government transfers and interest payments 110
Tax collections 195
GDP 2500


b.
GDP 6,150
Tax collections 1,425
Government transfers and interest payments 400
Consumption expenditures 4,520
Government budget surplus 100

c.
Consumption expenditures 4,300
Investment 1,000
Government purchases 1,000
Net exports 6
Tax collections 1,575
Government transfers and interest payments 500

Answer 1

Answer:

a.  Public saving = Tax collections - Government purchases - Transfers and interest payments

=195 - 160 - 110

= -75

Private saving = Household saving + business saving

= 200 + 400

= 600

National saving = Private saving + public saving  

= 600-75

= 525

National saving rate = National saving/GDP

= 525/2500

=0.21

= 21%

b. Private sector disposable income = GDP - Taxes + Transfers

= 6150 - 1425 + 400

= 5125

Private sector savings = Disposable income - consumption

= 5125 - 4520

= 605

Public savings = Govt budget surplus = 100

National savings = Private savings + Govt savings

= 605 + 100

= 705

National savings rate = National savings / GDP

= 705 / 6,150

= 0.1146

=11.46%

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c. GDP = Consumption + investment + Government purchase + Net Export

= 4,300 + 1,000 + 1,000 + 6

= 6,306

Govt savings = Taxes - Transfers - Govt purchases

= 1,575 - 500 - 1,000

= 75

Private sector disposable income = GDP - Taxes + Transfers

= 6,306 - 1,575 + 500

= 5,231

Private sector savings = Disposable income - consumption

= 5,231 - 4,300

= 931

National savings = Private savings + Government savings

= 931 + 75

= 1,006

National savings rate = National savings / GDP

= 1,006 / 6,306

=0.1595

= 15.95%