On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. The private sector has a .

Question

Quizplus · Accepted Answer

Private sector savings = saving - (net taxes + government budget deficit)
Private sector savings = 250 - (100 + 175) = -25
Since private sector savings are negative, this means that the private sector has a deficit. To balance this deficit, it must borrow from the rest of the world, which is reflected in the net exports of 50 fish. Therefore, the private sector has a surplus of 50-(-25) = 75 fish, and overall, a surplus of 225 fish. Choice A is the correct answer.

On the Island Country of Sunshine Where the Unit of Currency