Question

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is private saving

Answer 1

Answer: Private savings is $3.5 trillion

Explanation:

Private saving firstly is the amount that households are left over with after paying their taxes and consumption spending.

therefore we will use the formula private savings = Y-C-T, in which Y is the economies GDP, C is consumption in the economy, T is the Taxes paid by the households to government.

now we substitute these values on the above mentioned formula:

Private savings = $12 trillion - $8trillion -$0.5 trillion

                         =$ 3.5 trillion therefore private savings is $3.5 trillion.