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Macroeconomics Assignment (Solved)

   

Added on  2021-04-21

12 Pages2416 Words61 Views
Running head: MACROECONOMICSMacroeconomicsName of the studentName of the universityAuthor Note

1MACROECONOMICSTable of ContentsAnswer 1:.........................................................................................................................................2Answer 2:.........................................................................................................................................4Answer 3:.........................................................................................................................................5Answer 4:.........................................................................................................................................6Answer 5:.........................................................................................................................................7References:....................................................................................................................................10

2MACROECONOMICSAnswer 1:a) Private savings of a country implies the difference between gross domestic products (GDP)with tax and consumption (Auerbach et al. 2017). In the given equation, country’s GDP is $ 20billion, consumption (C) is $13 billion and tax revenue (T) is $ 1 billion. Hence, the value of private savings is: Private savings= GDP - C – TPrivate savings = 20 - ( 13 + 1)Private savings = ( 20 – 14)Private savings = 6Thus, the private saving is worth $6 billion.b) The public savings represent the difference between tax revenue (T) and spending ofgovernment (G). In the given equation, the amount of government purchase is worth $ 3 billion. Public Savings = T – GPublic Savings = ( 1 – 3)Public Savings = - 2The negative value of public saving implies budget deficit. From the aboveequation, it can be stated that the country is facing this phase.c) The equation of total supply of loanable funds is as follow:Supply of loanable funds = private savings + public savings + foreign savings

3MACROECONOMICSHence, supply of loanable funds increases when public savings increase (Fontana andSawyer 2016). On the other side, a decreasing amount of public savings influencessupply of loanable funds to go down.d) In a closed economy, national savings represent the sum total of private savings andpublic savings. Hence, in the given equation, the value of nation savings is as follows: National savings = private savings + public savingsNational savings = 6 + (-2)National savings = 4Therefore, the value of national saving of this country is $ 4 billion. e) This economy is facing a closed economic condition. Under a closed economy, thecountry does not perform any servicer related to export and import. Hence, the value ofnet export of this country is zero. f) In a closed economy, aggregate demand and aggregate supply of the country remainssame. This further implies that aggregate savings is always equal with aggregate supply.Here, aggregate supply implies sum total of private savings and public savings((Auerbach et al. 2017). In other words, aggregate savings and national savings are sameconcept. Hence, the value of investment is $ 4 billion.

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