Question

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national saving?

Answer 1

Answer:

Private saving=20,000-3,000-15,000=2,000

Public Saving=3,000-4,000=(1,000)

National saving=2,000+(1,000)

                         =1,000

Explanation:

Private saving in a close economy shall be calculated as follows:

Private saving=Y-T-C

Y=GDP=20,000

T=taxes=3,000

C=consumption=15,000

Private saving=20,000-3,000-15,000=2,000

Public saving in a close economy shall be calculated as follows:

Public Saving=T-G

T=Taxes=3,000

G=Government purchases=4,000

Public Saving=3,000-4,000=(1,000)

National saving in a close economy shall be calculated as follows:

National saving= private saving +public saving

                         =2,000+(1,000)

                        =1,000