Suppose an economy’s national accounts are GNP = 100, C = 70, I = 40, G = 20 and EX = 20 where GNP is gross national product, C is consumption, I is investment, G is government spending, and EX is exports. Using the national income identity, find the value of imports (IM). What is the current account balance? What is the (economy-wide) savings rate? What would the government, private, and total savings rate be if the government reduced taxes T = 10 while the other variables remain unchanged?

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GNP is the final value of goods and services produced by a factor of production in an economy durin... View the full answer