Question:
Table below shows some macro economic data for a certain economy. [Gross Domestic Capital Formation: 50; Exports: 10; Imports: 16; Government savings: -3] The value of private savings in this economy is
(1) Rs. 47 billion.
(2) Rs. 44 billion.
(3) Rs. 41 billion.
(4) Rs. 34 billion.
(5) Rs. 31 billion.
Correct Answer:
(1)
Answer Explanation:
In macroeconomic equilibrium: Investment (I) = Private Savings (S) + Government Savings (T-G) + Foreign Savings (M-X). Rearranging for Private Savings (S): S = I – (T-G) – (M-X). Here, I = 50, Govt Savings = -3, and Net Imports (M-X) = 16 – 10 = 6. So, S = 50 – (-3) – 6 = 50 + 3 – 6 = 47.
Topic: Macroeconomic Equilibrium Year: 2022
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