How much, as a fraction of GNP, was the budget balance in 2007?

1. The following table shows the National Income and Product Account of the United States and the Consolidated Government Account one decade ago, in 2007.

U.S. National Income Account and Consolidated Government Account, 2007

(In billions of dollars)


2007


Summary National Income and Product Accounts

Gross National Product (GNP) 13,937

Private Consumption 9,734

Private Investment 2,125

Government Spending 2,689

Govt. consumption 2,221

Govt. investment 468

Current Account Balance (excludes unilateral transfers) -611

Government Consolidated Budget

Government Revenues 4,213

Government Outlays (includes govt. spending plus 4,633

transfer payments and other expenditures


Source: U.S. Department of Commerce.

(A) How much was U.S. absorption in 2007? As a proportion of GNP, was absorption in 2007 greater or lower than in 2016 (using the data presented in class)? Please explain your calculations.

(B) As a fraction of GNP, how does the current account balance (excluding unilateral transfers) in 2007 compare with that in 2016 (as presented in class)? What are the economic implications of this change?

(C) How much, as a fraction of GNP, was the budget balance in 2007? Did the budget balance deteriorate or improve between 2007 and 2016 (using the data presented in class), as a fraction of GNP? By how much? Explain.

(D) Break down the current account balance (as a fraction of GNP) into its national savings and investment components (as a fraction of GNP). What were the changes between 2007 and 2016 (as presented in class)? What accounts for the changes in the current account balance: changes in savings or changes in investment or both? Explain.