The following table provides some hypothetical data on macroeconomic accounts fo

Question

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. Accounts

Country A Country B Country C

S 700 500 600

T 0 500 500

G 600 350 650

I 800 400 450

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 net lender, 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

Explanation / Answer

C + I + G + NX = C + S + T

NX = S + T - I - G

NX = trade balance

a) Country A: Trade balance = 700 + 0 - 600 - 800 = - 700 bn

Country B: Trade balance = 500 + 500 - 350 - 400 = 250 bn

Country C: Trade balance = 500 + 600 - 650 - 450 = 0 bn

b)

Country A - trade deficit (NX is negative)

Country B - trade surplus (NX is positive)

Country C - balanced trade (NX is zero)

c)

Country A : T - G = - $600 , government is a net borrower as taxes < government expenditure

Country B : T - G = $150 , government is a net lender as taxes > government expenditure

Country C : T - G = - $150 , government is a net borrower as taxes < government expenditure

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.