Suppose that in 2021, the GDP is $18,000 billion, the net factor payment is $300

Question

Suppose that in 2021, the GDP is $18,000 billion, the net factor payment is $300 billion, the consumption is $11,000 billion, and the government purchase is $3200 billion. Suppose also that the taxes, the transfer from the government, and the interest payments on the government debt are all zero in 2021. Calculate the private saving in 2021. Calculate the government saving in 2021. Calculate the national saving in 2021. GDP deflator calculation The US nominal GDP is $17.15 trillion, and the US real GDP is $15.95 trillion as of March 31. 2014. Calculate the GDP deflator. If the US nominal GDP is $17.15 trillion and the GDP deflator was 105, what would the US real GDP be? Real interest rate calculation Suppose that the annual nominal interest rate is 3% from 2014 to 2015. Suppose also your expected inflation is 1.8% from 2014 to 2015. What is your expected real interest rate? You revised your expectation and now you expect 4.5% of inflation from 2014 to 2015. What is your expected real interest rate now?

Explanation / Answer

2.)

Y = GDP = $18,000 billion

C = Consumption = $11,000 billion

I = Investment = 0

G = Government spending = $3,200 billion

T = Taxes = 0

TR = Transfer payments = 0

INT = Net interest payments = 0

NFP = Net factor payments = $300 billion

A.) Private saving: Spvt = YDpvt - C = Y + NFP + TR + INT - T - C

Private saving(in billions) = $18,000 + $300 - $11,000 = $7,300

B.)Government (public) saving: Sgovt = T - TR - INT - G

Public Savings (in billions) = -$3,200

C.)National Saving:  SN = Spvt + Sgovt = Y + NFP - C - G

National Saving(in billions) = $7,300 - $3,200 = $4,100

3.)

A.) GDP Deflator = [Nominal GDP / Real GDP] * 100

GDP Deflator = [$17.15 trillion / $15.95 trillion]*100 = 107.52

B.) Real GDP = [Nominal GDP / (GDP Deflator/100)]

Real GDP = [$17.15 trillion / 105]*100 = $16.33 trillion

4.)

A.) Real Interest rate = Nominal Interest rate - Inflation rate

Real Interest rate = 3% - 1.8% = 1.2%

B.) Real Interest rate = Nominal Interest rate - Inflation rate

Real Interest rate = 3% - 4.5% = -1.5%

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