Question

In the U.S. economy, the offsetting effects of private saving compared to government borrowing are typically noted as being represented by which of the following ratios?
a) much more than two-to-one
b) slightly more than two-to-one
c) much less than one-to-one
d) slightly less than one-to-one

Answer 1

Answer:

c) much less than one-to-one

Explanation:

Based on info of the GDP associated with Budget deficits and trade deficits we see that the private saving not tend to increase on cases when governments run large budget deficits, by the other hand the private saving tend to decrease when governments reduce deficits or run large budget surpluses.

And based on this info we can say that the offsetting effects associated to private saving compared to government borrowing needs to be much less than one-to-one.

In the US occurs a Budget Deficit around 1998-199 since the % of GDP increase considerably around 3-4% and a trade deficit occurs around 2004 when the % of GDP was around -6%.