Sector Balances after Period 2

• Answer: government's balance is 10; private sector's balance is -12; foreign sector's balance is 2

                                                 Domestic
              Government                         Private                           Foreign

        \                    /            \                    /            \                    /
         \                  /  Spend:  90  \                  /  Import:  5  \                  /
          \     $  10      /   --------->   \     $ -12      /   --------->   \     $   2      /
           \              /    Tax:   100    \              /    Export:  3    \              /
            \            /     <---------     \            /     <---------     \            /
             \__________/                      \__________/                      \__________/

                $  10               +             $ -12              +              $   2          ≡   0

• The sector balances sum to 0

• Government sector has run a surplus, but domestic private sector now runs steep deficit