Question

calculate NNP at MP
household expenditure on consumption 200000 government expenditure on consumption 12500
gross capital formation 25,000 depreciation 6000
export 6000
import 9000
Net Earned income from abroad 750​

Answer 1

Answer:

Explanation:

Corey's wealth is $ 2100 - $ 400 = $ 1700.

If the Koufax baseball card is found to be a forgery, Corey suffers a capital loss of $ 400 and his wealth drops to $ 900.

If he uses his income to pay off his credit card balance, his wealth increases by $ 150. Note that this should count as saving , even though the income was not put into the bank.

If he uses his checking account to pay off his liabilities, his assets and his liabilities both drop by the same amount.

Of the previous transactions, only using income to pay off the credit card balance counts as saving by the text definition.

Problem 2 -- Stocks and Flows

Stocks in the sense of this problem refer to the value or quantities of items owned at a given point in time, whenever the items were produced or acquired;

flows refer to changes over a specific period of time.

Assets are stocks; income is a flow.

With this in mind, the classification of the items is easy:

GDP is a flow; it is measured quarter by quarter or year by year.

National saving is a flow; again, it is measured by the quarter or year.

The value of the housing stock is a stock (that one was easy!); we are not looking at the new housing constructed that year, as we would be if we counted residential investment (a flow), but at all the houses in existence now, whenever they were built.

The amount of currency in circulation today is a stock; look at the dates on the bills in your wallet; they were not all printed this year.

The government budget deficit is a flow; it is part of national saving (or dis-saving) this year .

The national debt is a stock; it results from the accumulated total of budget deficits over the course of years, including money borrowed to pay for World War II, Korea and Vietnam.

Problem 3 -- Motives for Saving

Ellie is pregnant and will likely save due to life cycle motives -- to pay for her child's education.

Vince reads about layoffs and may save due to precautionary motives.

Vince learns he must save if he wants a house; life cycle motives come into play.

Ellie wants to go to law school; life cycle saving will be necessary.

Capital gains in the stock market may decrease saving if Ellie and Vince have a fixed retirement target; why go to the trouble of saving at all?

Saving to leave money to charity is an example of the bequest motive for saving.

Problem 4 -- Individual Retirement Accounts

The tax advantage of an IRA will motivate Greg to save his $ 10,000 bonus in an IRA rather than a savings account, even if the expected rate of interest is the same.

The math is simple: you will only have $ 7,000 to put in the regular savings account after paying taxes, and at the end of 5 years you will have:

Future value = $ 7000 (1.05) ^ 5

Whereas the IRA will bring:

Future value = $ 10,000 (1.05) ^ 5

Note though, the impact of the IRA is on deciding how to save; it is not clear that it will have as great an effect on weather to save .

Problem 5. Saving and Investment

In each of the following, calculate private, public and national savings and the national savings rate.

Given that:

Household savings = 200

Business savings = 400

Government purchases = 100

Government transfers = 100

Tax collections = 150

Gross Domestic Product = 2,200

We can calculate

Govt savings = Tax collections - Transfers - Govt spending, or

Govt savings = 150 - 100 - 100 = - 50

Private savings = Household savings + business savings = 600

National savings = Govt savings + Private Savings = - 50 + 600 = 550

National savings rate = National savings / GDP = 550 / 2200 = 0. 25 or 25 percent

Given that:

GDP = 6,000

Tax collections = 1,200

Govt transfers = 400

Govt spending = ??

Govt budget surplus = 100

Consumption expenditures = 4,500

We can calculate

Private sector disposable income = GDP - Taxes + Transfers = 6,000 - 1,200 + 400 = 5,200

Private sector savings = disposable income - consumption = 5,200 - 4,500 = 700

Govt savings = Govt budget surplus = 100

National savings = Private savings + Govt savings = 700 + 100 = 800

National savings rate = National savings / GDP = 800 / 6,000 = 0.1333 or 13.33 percent

Note that since the government budget surplus is given as 100, we can calculate government spending as

100 = Taxes - Transfers - Govt spending

100 = 1,200 - 400 - G