4. Government saving is defined as T - (G+TR+INT), where G is government purchases. But suppose that
Question:
4. Government saving is defined as T - (G+TR+INT), where G is government purchases. But suppose that we split government purchases into two parts: government consumption expenditures (GCE) and government investment (GI) and that we define a new version of government saving, which is T - (GCE + TR+INT). With this new definition of government saving, which treats government investment similarly to private investment, how would the uses-of-savings identity be modified? To investigate how much difference this redefini- tion would make, look at the NIPA section of a recent issue of the Survey of Current Business or online at www. bea.gov, and find Table 5.1, "Gross Saving and Invest- ment." The table refers to private saving as gross pri- vate saving, to investment as gross private domestic investment, to the current account balance as net for- eign investment, to government investment as gross government investment, and to the new version of government saving as gross government saving. Verify that both the old and new definitions of the uses-of-savings identity are valid, except for statistical discrepancies.
Step by Step Answer: