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Private saving and national saving

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For the Kingdom of Wakanda, which is a closed economy, total output is equal to $30 billion and consumption equals $15 billion. The Wakandan government spends $5 billion and has a budget surplus of $1 billion.

1. Find government saving, taxes, private saving and national saving. Please show clearly how you calculated your final answers, and box/circle your final answers (in billions of dollars) with proper labels (e.g. T = $x billion ).

2. Suppose now the Wakandan government cuts taxes by $1 billion. Assume that total output, initial consumption, and government spending are as specified previously. Determine the new values of taxes, consumption, government saving, private saving, and national saving if Wakandan consumers save 1/2 of the tax cut and spend the other 1/2.

Reference no: EM132476327

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