Chapter 26 - Part IX - Saving, Investment, and the Financial System - Problems and Applications - Page 567: 4

Consumption is 6 trillion dollars Government purchases are 1.3 trillion dollars National saving is 0.7 trillion dollars Investment is 0.7 trillion dollars

All numbers are in trillions of dollars GDP is 8 Taxes are 1.5 Private saving is 0.5 Public saving is 0.2 GDP = Y $Y = C + I + G + NX$ Under a closed economy, there are no net exports $Y = C + I + G + NX$ $Y = C + I + G$ National saving is the same as investment $S=I$ $Y = C + I + G$ $Y = C + S + G$ $Y - C - G = C + S + G - C - G$ $Y - C - G = S$ $Y - C - G + T - T = S$ $(Y - T - C) + (T - G) = S$ $Y - T - C$ is private saving $T + G$ is public saving Private saving $Y - T - C = .5$ $8 - 1.5 - C = .5$ $6.5 - C = .5$ $C = 6$ Public saving $1.5 - G$ National saving (and investment) $Y - T - C + T + G$ $Y - C + G$ $8 - C + G$ $Y = C + I + G$ $Y - I - G = C + I + G - I - G$ $Y - I - G = C$ public saving = taxes - government spending $0.2 = 1.5 - G$ $G= 1.3$ $Y - I - G = C$ $8 - I - 1.3 = 6$ $6.7 - I = 6$ $6.7 = I + 6$ $.7 = I$ $S = I$ $S = .7$