Macroeconomics Problem Set 1 Essay

To derive the PS approximation, information on GDP, Consumption, and Government expenditures was obtained from the website as detailed in the homework. Then development excel I was able to recreate the formula given with the avowedly data to get the approximation numbers. B. The true measure of PS was obtained a lot the same way as the approximation, only this time I utilize data for Private Sector Savings and Private Disposable Income pulled from the database sort of of Y, C, and G. C. Attached.Overall its not a terrible approximation. There appears to be a rough five billion dollar inflation in the approximation from the true value, but over the course of time the trends proceed similar.Every now and then you will see a prodigious dip in the approximation at the same time the true value significantly spikes, but aside from that they behave much the same, with a seemingly uniform $5 bil over-approximation across the years. E. For these two measures to be the same, in that respect can be no government, and no international trading.The reason for no government is that taxes must be zero to allow for Y to post alone in both denominators also there must be no government deficit so as to allow for no interest payments. With no taxes and no deficit, it follows that there can be no government spending whatsoever (this takes care of removing transfer and interest payments from the inaugural equation as well). As for having a closed economy with no imports/exports, this is because the Net Factor Payments have to get even zero to allow for these equations to equal each other.