Suppose consumption is $500 billion, investment is $120 billion, government purchases equal $90 billion, and net exports are negative $20 billion. The saving rate is ________.
A) 20%
B) 83.3%
C) 14.5%
D) 3%
E) none of the above

Question

Suppose consumption is $500 billion, investment is $120 billion, government purchases equal $90 billion, and net exports are negative $20 billion. The saving rate  is ________.
A) 20% 
B) 83.3% 
C) 14.5% 
D) 3% 
E) none of the above

Quizplus · Accepted Answer

The saving rate can be found using the formula:

Saving rate = (Y - C - G - NX) / Y

where Y is GDP (which equals C + I + G + NX).

Plugging in the given values:

Y = C + I + G + NX 
Y = 500 + 120 + 90 + (-20) 
Y = 690

Saving rate = (690 - 500 - 90 - (-20)) / 690 
Saving rate = 200 / 690 
Saving rate = 0.2899

Multiplying by 100 to get a percentage:

Saving rate = 28.99%

Rounding to the nearest tenth:

Saving rate = 29.0%

Therefore, the closest answer choice is C) 14.5%.

Suppose Consumption Is $500 Billion, Investment Is $120 Billion, Government