ecn ch 18 self-check Questions and Answers
(100% Correct Answers) Already Graded A+
In a country, private savings equals 600, the government
budget surplus equals 200, and the trade surplus equals
100. What is the level of private investment in this
economy? [ Ans: ] We use the national savings and
investment identity to solve this question. In this case, the
government has a budget surplus, so the government
surplus appears as part of the supply of financial capital.
Then:
Quantity supplied of financial capital=Quantity demanded
of financial capital
S + (T - G)= I+(X - M)
600 + 200 = I + 700
I=700
In the late 1990s, the U.S. government moved from a
budget deficit to a budget surplus and the trade deficit in
the U.S. economy grew substantially. Using the national
saving and investment identity, what can you say about
the direction in which saving and/or investment must
have changed in this economy? [ Ans: ] In this case, the
national saving and investment identity is written in this
way:
, Quantity supplied of financial capital = Quantity
demanded of financial capital
(T - G) + (M - X) + S = I
Assume an economy has a budget surplus of 1,000,
private savings of 4,000, and investment of 5,000.
Write out a national saving and investment identity for
this economy.
What will be the balance of trade in this economy?
If the budget surplus changes to a budget deficit of 1000,
with private saving and investment unchanged, what is
the new balance of trade in this economy? [ Ans: ] a. Since
the government has a budget surplus, the government
budget term appears with the supply of capital. The
following shows the national savings and investment
identity for this economy.
Quantity supplied of financial capital=Quantity demanded
of financial capital
S + (T - G) = I + (X - M)
b. Plugging the given values into the identity shown in
part (a), we find that (X - M) = 0.
c. Quantity supplied of financial capital= Quantity
demanded of financial capital
(100% Correct Answers) Already Graded A+
In a country, private savings equals 600, the government
budget surplus equals 200, and the trade surplus equals
100. What is the level of private investment in this
economy? [ Ans: ] We use the national savings and
investment identity to solve this question. In this case, the
government has a budget surplus, so the government
surplus appears as part of the supply of financial capital.
Then:
Quantity supplied of financial capital=Quantity demanded
of financial capital
S + (T - G)= I+(X - M)
600 + 200 = I + 700
I=700
In the late 1990s, the U.S. government moved from a
budget deficit to a budget surplus and the trade deficit in
the U.S. economy grew substantially. Using the national
saving and investment identity, what can you say about
the direction in which saving and/or investment must
have changed in this economy? [ Ans: ] In this case, the
national saving and investment identity is written in this
way:
, Quantity supplied of financial capital = Quantity
demanded of financial capital
(T - G) + (M - X) + S = I
Assume an economy has a budget surplus of 1,000,
private savings of 4,000, and investment of 5,000.
Write out a national saving and investment identity for
this economy.
What will be the balance of trade in this economy?
If the budget surplus changes to a budget deficit of 1000,
with private saving and investment unchanged, what is
the new balance of trade in this economy? [ Ans: ] a. Since
the government has a budget surplus, the government
budget term appears with the supply of capital. The
following shows the national savings and investment
identity for this economy.
Quantity supplied of financial capital=Quantity demanded
of financial capital
S + (T - G) = I + (X - M)
b. Plugging the given values into the identity shown in
part (a), we find that (X - M) = 0.
c. Quantity supplied of financial capital= Quantity
demanded of financial capital
