Question

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct? a. Private and public saving are both positive. b. Private saving is positive; public saving is negative. c. Private saving is negative; public saving is positive. d. Both private saving and public saving are negative.

Answer 1

Answer:

In a macroeconomic scenarion in which a country has a closed economy that has a government deficit and positive investment.

b. Private saving is positive; public saving is negative.

Explanation:

Private intervention would be positive in a scenario with a closed economy. Because even though the economy is closed it would be open to private local investors and if they don't obtain profit out of it, they would stop financing the economy to make it grow. however, public savings would be negative because the deficit is the loss of an inefficient public investment sector.