Suppose the U.S. has domestic savings of $50 billion, domestic investment of $120 billion, and a government budget deficit of $150 billion. Japan has domestic savings of 25 trillion yen, domestic investment of 10 trillion yen, and a government budget deficit of 8 trillion yen. Calculate the amounts of net foreign investment by the U.S. and by Japan.
What will be an ideal response?
Use the equation S = I + NFI + (G?T). For the U.S. we have (in billions of dollars) 50 = 120 + NFI + 150, so NFI = ?220. For Japan (in trillions of yen) 25 = 10 + NFI + 8, so NFI = 7.
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