GDP: Calculating Private Saving?
This is the information I am given...personal consumption expenditure = 80, gov. purchases = 30, net taxes = 35, gross private domestic investment=20, imports=10, and exports =20.
From this information I need to calculate the value of private saving.
Answer:
The key is to note the equation:
CurrentAccount = PrivateSavings − Investment − (GovernmentExpenditures − Tax)
This follows from the fact that funds must go *somewhere* either into investment, government bonds, or abroad (which is a capital account flow... which is just equivalently expressed as the negative of the current account). Rearrange all that and get the above equation.
Anyway, with your numbers: (20-10) + (30-35) + 20 = 25.
So, private savings are 25.
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From this information I need to calculate the value of private saving.
Answer:
The key is to note the equation:
CurrentAccount = PrivateSavings − Investment − (GovernmentExpenditures − Tax)
This follows from the fact that funds must go *somewhere* either into investment, government bonds, or abroad (which is a capital account flow... which is just equivalently expressed as the negative of the current account). Rearrange all that and get the above equation.
Anyway, with your numbers: (20-10) + (30-35) + 20 = 25.
So, private savings are 25.
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