Questions in Macroeconomics
Chapter 10: Savings, Investment Spending and the Financial System
1. Given the following information about the closed economy of Brittania, what is the level of investment spending and private savings, and what is the budget balance? What is the relationship among the three? Is national savings equal to investment spending? There are no government transfers.
GDP= $1,000 million T= $50 million C= $850 million G= $100 million
Investment spending is $50 million. The budget balance is $50 million. Private savings is $100 million. Investment spending is equal to national savings in a closed economy.
2. Given the following information about the open economy of Regalia, what is the level of investment spending and private savings, and what are the budget balance and capital inflow? What is the relationship among the four? There are no government transfers. (Hint : capital inflow= the value of imports (IM) minus the value of exports (X).
GDP= $1,000 million G= $100 million C=$850 million X=$100 million T=$50 million IM=$ 125 million
Investment spending is $75 million. Private savings is $100 million. The budget balance is $50 million. The capital inflow is $25 million. The relationship among the four is investment spending must equal the sum of private savings, capital inflow and the budget balance.
3. The accompanying table shows the percentage of GDP accounted for by private savings, investment spending, and capital inflow in the economies of Capsland and Marsalia. Capsland is currently experiencing a net capital inflow and Marsalia, a net capital outflow. What is the budget balance (as a percentage of GDP) in both countries? Are Capsland and Marsalla running a budget deficit or surplus?
Capsland Marsalia
Investment spending as a percentage of GDP 20% 20%
Private savings as a percentage of GDP 10 25
Capital inflow as a percentage of GDP 5 -2 In both countries investment spending as a % of GDP must be equal to the sum of the
1. Given the following information about the closed economy of Brittania, what is the level of investment spending and private savings, and what is the budget balance? What is the relationship among the three? Is national savings equal to investment spending? There are no government transfers.
GDP= $1,000 million T= $50 million C= $850 million G= $100 million
Investment spending is $50 million. The budget balance is $50 million. Private savings is $100 million. Investment spending is equal to national savings in a closed economy.
2. Given the following information about the open economy of Regalia, what is the level of investment spending and private savings, and what are the budget balance and capital inflow? What is the relationship among the four? There are no government transfers. (Hint : capital inflow= the value of imports (IM) minus the value of exports (X).
GDP= $1,000 million G= $100 million C=$850 million X=$100 million T=$50 million IM=$ 125 million
Investment spending is $75 million. Private savings is $100 million. The budget balance is $50 million. The capital inflow is $25 million. The relationship among the four is investment spending must equal the sum of private savings, capital inflow and the budget balance.
3. The accompanying table shows the percentage of GDP accounted for by private savings, investment spending, and capital inflow in the economies of Capsland and Marsalia. Capsland is currently experiencing a net capital inflow and Marsalia, a net capital outflow. What is the budget balance (as a percentage of GDP) in both countries? Are Capsland and Marsalla running a budget deficit or surplus?
Capsland Marsalia
Investment spending as a percentage of GDP 20% 20%
Private savings as a percentage of GDP 10 25
Capital inflow as a percentage of GDP 5 -2 In both countries investment spending as a % of GDP must be equal to the sum of the