Economics 1022A/B Lecture Notes - Lecture 23: Government Budget Balance, Credit Risk, Nominal Interest Rate

a) Trade deficits occur when S+T>I+G

b) Trade deficits occur when S+T < I +G

c) Can be caused by government budget deficits or levels of investment that exceed private savings

d) Both b and c are correct

Assume that the equations below describe the expenditures within a particular macroeconomy and that these equations conform to the assumptions we've made in the lecture regarding the fixed price level Aggregate Expenditure model. All values for expenditure and income are dollar amounts, but for simplicity, we've dropped the $ below.

Given the equations above, we can describe the GDP, government budget, and net exports in this economy. Select three characteristics from the list below which accurately describe this economy. Note that there is no partial credit on this question. I.e., your answer will either be all correct, or all wrong.

Y=15 trillion

C=8 trillion

I=3 trillion

TR=2 trillion

T=3 trillion

Use the data to find:

a. private saving

b. public saving

c. government purchases

d. the government budget balance and if there is a surplus, balance, or deficit