Explore BrainMass

Explore BrainMass

    Spending calculations

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Assume that the officials in Ecoland have compiled the following information about their economy for last year:

    Y = 10,000
    C = 6,000
    T = 1,500
    G = 1,700

    The government uses the following equation for the investment function:

    I = 3,300 ââ?¬" 100r

    Where r = equal to Ecoland's real interest rate.

    Calculate, then explain, the following:

    Private saving
    Public saving
    National saving
    The equilibrium real interest rate

    © BrainMass Inc. brainmass.com March 4, 2021, 11:41 pm ad1c9bdddf

    Solution Preview

    1) Private Saving

    Private saving is the total amount of individuals (i.e. the citizens) save. Obviously, saving is what you earn take away taxes and take away what you spend. So it should be Private saving = disposable income - consumption. Disposable income is the amount of money available to you to spend, this is income minus taxes. You are able to spend either parts of all of your disposable income (and in some cases, you are able to spend more).

    Disposable income = income - tax = Y - T = 10,000 - 1,500 = 8,500
    Private saving = 8,500 - 6,000 = 2,500

    2) Public ...

    Solution Summary

    Spending calculations