In a country, private savings equals $600, the government budget surplus equals $200, and the trade surplus equals $100. What is the level of private investment in this economy?
Assume an economy has a budget surplus of $1,000, private savings of $4,000, and investment of $5,000.
- Write out a national saving and investment identity for this economy.
- What is the balance of trade in this economy?
- If the budget surplus changes to a budget deficit of $1,000, with private saving and investment unchanged, what is the new balance of trade in this economy?
Why have many education experts recently placed an emphasis on altering the incentives faced by U.S. schools rather than on increasing their budgets? Without endorsing any of these proposals as especially good or bad, list some of the ways in which incentives for schools might be altered.
What are some steps the government can take to encourage research and development?
Imagine an economy in which Ricardian equivalence holds. This economy has a budget deficit of $50, a trade deficit of $20, private savings of $130, and an investment of $100. If the budget deficit rises to $70, how are the other terms in the national saving and investment identity affected?
During the late 1990s, the U.S. government moved from a budget deficit to a budget surplus, and the trade deficit in the U.S. economy grew substantially. Using the national saving and investment identity, what can you say about the direction in which saving and/or investment must have changed in this economy?