a. Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2

Question

a. Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving? b. For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving? c. In a closed economy investment is $20 billion and private saving is $22 billion. What are public saving and national saving?

Explanation / Answer

a) private saving = 11000 - 2500 - 7500 = 1000 (Y-T-C) public saving = 2500 - 2000 = 500 (T-G) National saving = sum of above two = 1500 b) private saving = 11- 7 - 2 = 2 trillion public saving = -1 trillion National saving = 2-1 = 1 trillion c) public saving = I = 20 bn national saving = 22 + 20 = 42 bn

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