Question 3 options: The following table provides some hypothetical data on macro

Question

Question 3 options:

The following table provides some hypothetical data on macroeconomic accounts for three countries represented by A, B, and C and measured in billions of currency units. In the table below, private household saving is S, tax revenue is T, government spending is G, and investment spending is I.

Instructions: Enter all numerical values as whole numbers.

a) Calculate the trade balance for each country.

Country A: Trade Balance = $

Country B: Trade Balance = $

Country C: Trade Balance = $

b) State whether each one has a trade surplus, trade deficit, or balanced trade.

Country A:

Country B:

Country C:

c) For each country, calculate the government budget balance and state whether it is a netlender, borrower, or neither internationally.

Country A: The government budget balance is $

and is a

Country B: The government budget balance is $

and is a

Country C: The government budget balance is $

and is a

Accounts Country A Country B Country C S 700 500 600 T 0 500 500 G 600 350 650 I 800 400 450

Explanation / Answer

a) Trade balance = Export - Import = NX

For open economies NX = (S-I)-(G-T)

Country A = (700-800)+(600-0) =500

Country B =(500-400)+(350-500) =-50

Country C = (600-450)+(650-500) = 300

b) Trade balance is in Surplus if NX>0

Then from part A we can say that Countru A and C are in surplus while B is in deficit.

c) Budget Balance = (G-T), if (G-T)>0 then borrower other wise lender

Country A =(600-0) =600, borrower

Country B = (350-500) =-150, lender

Country C =(650-500) =150, borrower

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