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adr's avatar

Another first-year Macroeconomics question: see details?

Asked by adr (434points) May 1st, 2011

Two questions:
In the first, I know that the answer is (A) but I do not know how to calculate Government expenditures (G) with any equation besides GDP = C + I + G + Nx.
But in the question, the other variables are not given. Is there another way to calculate G?

In the second question, I need to calculate disposable personal income (DI). I have two equations for this, one being DI = C + PS where C is consumption and PS is personal savings, neither of which are found in the listed info. The other equation is more complicated requiring national income, which again, I do not see how to acquire with the given information.

1. Consider the following information about an economy (in billion dollars):
Private savings 50
Net domestic investment 30
Import 40
Export 30
Taxes 70
Government loan from the central bank 10
Retained profits 20
From the information above we can conclude that:
(A) Government expenditures are 80;
(B) Gross domestic investment is 50;
(C) Overall savings are 20;
(D) Net exports is 10;
(E) None of the above.

2. Consider the following data ($ billions)
Gross National Product 2616
Capital Consumption allowance 276
Indirect business taxes 208
Corporate profits 149
Social Insurance contributions 240
Net interest 230
Dividends 56
Government transfers to individuals 298
Personal interest income 329
Personal tax and non-tax payments 325

Disposable personal income equals:
(A) $1759 (B) $1871 (C) $2083 (D) $2147 (E) $2331

These are my last two problems in this section and I am LOST

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1 Answer

Annerieke's avatar

to the first one: the variables are given and with that, you can calculate G. The variables in the GDP equation do mean exactly what is given in the question: private savings = C, net domestic investment = I and the exports – imports = Nx (netto exports). I hope that helps a bit, my macroeconomics class was some time ago.

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