Suppose GDP equals $10 trillion, consumption equals $6.5 trillion, the government spends $2 trillion and has a budget deficit of $300 billion. Assume a closed economy. Find the private saving and the investment spending.]

Question

Business

Jessie Walls

3 March, 17:02

Suppose GDP equals $10 trillion, consumption equals $6.5 trillion, the government spends $2 trillion and has a budget deficit of $300 billion. Assume a closed economy. Find the private saving and the investment spending.]

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Answers (1)

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Zoe Parrish · Answer 1

Private saving : 1.8

The investment spending: 1.5

Explanation:

Given:

GDP (Y) = $10 trillion Consumption (C) = $6.5 trillion Government spends (G) = $2 trillion Budget deficit (G - Tax) = f $300 billion = 0.3

We have public saving: G - Tax = 0.3 trillion

Tax = G - 0.3 = 2 - 0.3 = 0.7 trillion

Private saving = Y - T - C = 10 - 1.7 - 6.5 = 1.8 trillion

National saving = Y - C - G = 10 - 6.5 = 2 = 1.5 trillion

Investment = national saving = 1.5 trillion