Suppose that the economy has a consumption of $14 trillion, domestic investment of $4 trillion, government purchases
Question:
Suppose that the economy has a consumption of $14 trillion, domestic investment of $4 trillion, government purchases of $9 trillion, export of $2 trillion, import of $4 trillion, capital inflow of $4 trillion, capital outflow of $6 trillion, private saving of $4 trillion, and tax of $7 trillion.
1) Suppose that there is no government and no international trade. Calculate net export and determine whether there is a trade surplus, trade deficit, or trade balance. Calculate GDP by using a GDP equation. Show the saving-investment identity equation without government and international trade and show whether it holds or not. Show all the equations and answers to have a full credit. (7 points)
2) Suppose that there is a government and no international trade. Calculate a public saving and determine whether there is a budget surplus, budget deficit, or balanced budget. Calculate a national saving. Show the saving-investment identity with only the government and explain whether it holds or not. Show all the equations and answers to have a full credit. (7 points)
3) Suppose that there is a government and international trade. Calculate a net capital flow and determine whether there is a net capital inflow or net capital outflow or no net capital flow. Show the saving-investment identity with a government and an international trade and explain whether it holds or not. Show all the equations and answers to have full credit. (5 points)