Problem
• In a closed economy, GDP is $1000, government purchases are $200, and consumption is $700. If the government has a budget surplus of $25, what are investment, taxes, private saving, and national saving?
• In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?
• Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus