Problem
I. In a country, private savings equals 800, the government budget surplus equals 49, and the trade surplus equals 79. What is the level of private investment (I) in this economy?
II. In a country, private investment equals 745, the government budget deficit equals 250 (in other words, public savings equals -250), and the trade surplus equals 220. What is the level of private savings (S) in this economy?
III. Suppose that it is the year 1999 and the U.S. government has a budget surplus, although the U.S. economy is still experiencing a trade deficit. Private savings equals 419, the government surplus equals 299, and private investment equals 920. What is the level of the trade deficit (M-X) in this economy?
IV. Assume an economy has a budget surplus of 1,900, private savings of 2,400, and investment of 3,400.
i. Write out a national saving and investment identity for this economy.
ii. What will be the balance of trade in this economy?
iii. If the budget surplus changes to a budget deficit of 1,900, with private saving and investment unchanged, what is the new balance of trade in this economy?