For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

Question

Melody Massey

Business

1 November, 06:02

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

+2

Answers (1)

Know the Answer?

Chana Roach · Answer 1

A. $1.5 trillion and $2.5 trillion, respectively

Explanation:

Given that

GDP = 11 Trillion

Tax = 2.5trillion

C = 7 trillion

Recall that

Private Savings = Disposable Income - Consumption

Disposable income = GDP - Tax

= 11 - 2.5

= 8.5

Private savings = 8.5 - 7

= 1.5 trillion.

National Savings = Private Savings + Budget balance

Given that

Budget balance = 1 trillion

Therefore,

National Savings = 1.5 + 1

= 2.5 trillion.