Question

Which of the following statements is correct?

Answer 1

Answer:

C) For a closed economy, the sum of private saving and public saving must equal investment.

Explanation:

In a closed economy, public savings (or budget surplus) = tax revenue - government spending

Private savings = aggregate spending - taxes + government transfers - private consumption

National savings = investment = public savings + public savings

For a closed economy, the savings-investment spending identity states that national savings and investment spending are always equal.