Suppose investment is $1,100 billion, private saving is $1,050 billion, and capital inflow from abroad is $100 billion. Solve the government budget deficit in the case.

Question

Paris Winters

Business

15 February, 19:25

Suppose investment is $1,100 billion, private saving is $1,050 billion, and capital inflow from abroad is $100 billion. Solve the government budget deficit in the case.

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Answers (1)

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Fatima Marks · Answer 1

Anoveoswer:

The government deficit is $150 billion

Explanation:

Current Account (CA) = Savings (S) - Investment (I).

Current account (CA) is also conventionally defined as (X-M) (value of exports - value of imports) + Net income from abroad. (R)

CA = (X-M) + (R)

In this case CA = $1050 billion - $1100 billion

CA = - $50 billion

Therefore CA = (X-M) + (R)

- $50 billion = x + $100 billion

X-M = - $100 billion + - $50 billion = - $150 billion