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Macroeconomics - how to calculate current account balance.?
It gives me the following information.
Consumption function: C = 100 + .8Yd
Planned investment: I= 39
Govt spending: G = 75
Exports = 25
Imports = .05Yd
Disposable income: Yd = Y-T
Taxes: T=40
Planned Aggregate Expenditure: AE = C+I+G+EX-IM
I'm lost on how to calculate the current account balance from this information, and no place I've looked (not even the textbook) can explain it. Thanks, everyone.
2 Answers
- ?Lv 79 years agoFavorite Answer
Firstly define "current account balance" cab - looks like something to do with government finances.
Secondly substitute into the 3 equations all of the quantities that have fixed values, from the identities I = 39 etc.
Thirdly the unknowns left are Yd and Y but you also have a relationship for them in the second equation.
Fourthly using your definition rewrite the last equation in terms of the cab and then using what is left of the other two equations you can substitute and determine the answer.
Source(s): logic