• Students must mention question number clearly in their answer. • All

• Students must mention question number clearly in their answer.

• All answered must be typed using Times New Roman (size 12, double-spaced) font

Question 1

(4 points) Assume we have a closed economy, the data you go over it on discussion 1 (table 17) show the following information for the first quarter of 2021 (assume export = import = net export = 0):

• National income (excluding net export) = 540,170,656,840 SAR.

• Consumption equal 240,691, 239,879 SAR.

• Government expenditures equal 139,731, 741,344 SAR.

Assume that the consumption tax rate is 15% (Value Added Tax) and investment 20% for capital. Solve for the following (parts a to e) if Saudi Arabia is considered a closed economy:

a- Tax revenue Hint, there are two types of tax; sales tax (VAT) and capital or investment. First, calculate investment to find tax revenue from investment. Add these two together.

b- Investment.

c- Private saving.

d- Public saving and what kind of budget does Saudi Arabia have.

e- National saving.

f- On a few words; explain how the government could increase investment level using fiscal policy.

Question 2

(1 point) Show how national saving equal investment and NCO using national income identity formula for open economy.