We showed in Eq. (2.10) that S =1 + CA, where S is national saving, I is investment, and CA is the current account balance. Calculations of national saving and investment depend on the treatment of government investment. In the text, we treated governmen purchases, G, as if they were consumption expenditures. Therefore, Eq. (2.7) states that government saving is Soovt = (T - TR- INT)- G, so that (1) national saving in Eq. (2.8) is S = Y+ NFP-C-G, and (2) / in Eq. (2.10) is gross private domestic investment GPDI. As mentioned in the text, a more detailed treatment recognizes that government purchases comprise consumption expenditures, which we will call GCE, and government investment, which we will call GI, so G = GCE + GI. Now define government saving as (T- TR- INT)- GCE. With this alternative definition of government saving, show that private saving plus government saving = I+ CA, where investment () is the sum of GPDI and GI. Here are recent values for many of the variables that influence our measures of saving and investment, in billions of dollars. Private saving + government saving 1,975 Gross domestic investment 2,550 Current account balance - 650 Capital account transactions 10 Statistical discrepancy - 65 Does the identity hold true? That is, does private saving plus government saving = / + CA? How can the entries for capital account transactions and statistical discrepancy help to make the identity hold true? O A. Statistical discrepancy + private saving + government saving- capital account transactions = gross domestic investment - current account balance. O B. Statistical discrepancy + private saving + government saving + capital account transactions = gross domestic investment + current account balance. OC. Statistical discrepancy + private saving + government saving- capital account transactions = gross domestic investment + current account balance. O D. Statistical discrepancy + private saving + government saving + capital account transactions gross domestic investment- current account balance.
We showed in Eq. (2.10) that S =1 + CA, where S is national saving, I is investment, and CA is the current account balance. Calculations of national saving and investment depend on the treatment of government investment. In the text, we treated governmen purchases, G, as if they were consumption expenditures. Therefore, Eq. (2.7) states that government saving is Soovt = (T - TR- INT)- G, so that (1) national saving in Eq. (2.8) is S = Y+ NFP-C-G, and (2) / in Eq. (2.10) is gross private domestic investment GPDI. As mentioned in the text, a more detailed treatment recognizes that government purchases comprise consumption expenditures, which we will call GCE, and government investment, which we will call GI, so G = GCE + GI. Now define government saving as (T- TR- INT)- GCE. With this alternative definition of government saving, show that private saving plus government saving = I+ CA, where investment () is the sum of GPDI and GI. Here are recent values for many of the variables that influence our measures of saving and investment, in billions of dollars. Private saving + government saving 1,975 Gross domestic investment 2,550 Current account balance - 650 Capital account transactions 10 Statistical discrepancy - 65 Does the identity hold true? That is, does private saving plus government saving = / + CA? How can the entries for capital account transactions and statistical discrepancy help to make the identity hold true? O A. Statistical discrepancy + private saving + government saving- capital account transactions = gross domestic investment - current account balance. O B. Statistical discrepancy + private saving + government saving + capital account transactions = gross domestic investment + current account balance. OC. Statistical discrepancy + private saving + government saving- capital account transactions = gross domestic investment + current account balance. O D. Statistical discrepancy + private saving + government saving + capital account transactions gross domestic investment- current account balance.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:We showed in Eq. (2.10) that S = 1 + CA, where S is national saving, / is investment, and CA is the current account balance. Calculations of national saving and investment depend on the treatment of government investment. In the text, we treated government
purchases, G, as if they were consumption expenditures. Therefore, Eq. (2.7) states that government saving is Saovt = (T - TR- INT)- G, so that (1) national saving in Eq. (2.8) is S = Y + NEP- C-G, and (2) I in Eq. (2.10) is gross private domestic
investment GPDI.
As mentioned in the text, a more detailed treatment recognizes that government purchases comprise consumption expenditures, which we will call GCE, and government investment, which we will call GI, so G = GCE + GI. Now define government saving as
(T- TR- INT) - GCE. With this alternative definition of government saving, show that private saving plus government saving = /+ CA, where investment (/) is the sum of GPDI and GI.
Here are recent values for many of the variables that influence our measures of saving and investment, in billions of dollars.
Private saving + government saving
1,975
Gross domestic investment
2,550
Current account balance
- 650
Capital account transactions
10
Statistical discrepancy
- 65
Does the identity hold true? That is, does private saving plus government saving = / + CA?
How can the entries for capital account transactions and statistical discrepancy help to make the identity hold true?
O A. Statistical discrepancy + private saving + government saving - capital account transactions = gross domestic investment – current account balance.
O B. Statistical discrepancy + private saving + government saving + capital account transactions = gross domestic investment + current account balance.
C. Statistical discrepancy + private saving + government saving - capital account transactions = gross domestic investment + current account balance.
D. Statistical discrepancy + private saving + government saving + capital account transactions = gross domestic investment – current account balance.
O O
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