1. Key terms and concepts

An economy that has no international trade is ...............(Closed Economy/an example of aggregate demand/an open economy)

The fraction of total disposable income that households spend on consumption is called.................(average prospensity to consume/marginal propensity to consume/aggregate demand)

The.....................(aggregate demand/average propensity to consume/aggregate supply)is the total demand for all the final goods and services in the economy

2. Saving and investment in the national income accounts

The following table contains data for a hypothetical closed economy that uses the dollar as its currency.

Suppose GDP in this country is $900. Enter the amount for investment.

National Income Account	Value
(Millions of dollars)
Government Purchases (G)	250
Taxes minus Transfer Payments (T)	325
Consumption (C)	375
Investment (I)

Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the previous table.

NationalSaving(S)	==	(Y-T-G)/(Y-C)/(G-T)/(Y-C-G)
	==	G/Y/I/C
		million

Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table.

Private saving	== (Y-T-I)/(C-T)/(Y-C-T)/(T-G)
	==	million

PublicSaving	== (Y-T-I)/(C-T)/(Y-C-T)/(T-G)
	==	million

Based on your calculations, the government is running a budget ...........................(surplus/deficit).