Based on the following information, calculate public saving, net foreign investment, and national income. Assume that the capital account is zero and net transfers are zero
private saving = $145 billion
exports = $285 billion
imports = $240 billion
consumption = $600 billion
private investment = $125 billion
government purchases = $75 billion
Based on the macroeconomic equation for national income, Y = C + I + G + NX = 600 + 125 + 75 + 45 = $845 billion. Since net exports are $45 billion, net foreign investment must also be $45 billion. According to the saving and investment equation, national saving = domestic investment plus net foreign investment. Based on the numbers provided, domestic investment plus net foreign investment = $125 billion + $45 billion = $170 billion. This $170 billion comes from private and public saving. Since private saving is $145 billion, it must be the case that public saving is $25 billion, so the government is running a budget surplus of $25 billion.
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