1. 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 $780 million. Enter the amount for government purchases. Value National Income Account ( Millions of dollars) Government Purchases (G) Taxes minus Transfer Payments (T) 260 Consumption (C) 300 Investment (I) 280 Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S ) = $ millionComplete 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 = $ million Public Saving = $ million Based on your calculations, the government is running a budget2. The meaning of saving and investment Classify each of the following based on the macroeconomic definitions of saving and investment. Saving Investment Jake purchases a new condominium in San Diego. O O Dmitri purchases a certificate of deposit at his bank. O O Latasha purchases stock in Pherk, a pharmaceutical company. O O Frances purchases new ovens for her cupcake-baking business. O O3. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. Supply INTEREST RATE (Percent) 2 Demand 0 100 200 300 400 500 800 LOANABLE FUNDS (Billions of dollars)is the source of the supply of loanable funds. As the interest rate falls, the quantity of loanable funds supplied Suppose the interest rate is 3.5%. Based on the previous graph, the quantity of loanable funds supplied is than the quantity of loans demanded, resulting in a of loanable funds. This would encourage lenders to the interest rates they charge, thereby the quantity of loanable funds supplied and the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of %4. The market for loanable funds and government policy The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (Note: You will not be graded on any changes you make to the graph.) O Supply Demand O Supply INTEREST RATE (Percent) Demand LOANABLE FUNDS (Billions of dollars)Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is an increase in the tax rate on interest income, from 20% to 25%. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending to Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve on the graph to reflect this change. The repeal of the previously existing tax credit causes the interest rate to and the level of investment to Scenario 3: Initially, the government's budget is balanced; then the government responds to the conclusion of a war by significantly reducing defense spending without changing taxes. This change in spending causes the government to run a budget , which national saving. Shift the appropriate curve on the graph to reflect this change. This causes the interest rate to the level of investment spending