Question

A closed economy has income of $1,500 billion, government spending of $260 billion, taxes of $180 billion, and investment spending of $300 billion. Consumption spending is $ billion. Private saving is $ billion. Public saving is $ billion. National saving is $ billion.

Answer 1

Answer:

(i) $940 billion

(ii) $380 billion

(iii) -$80 billion

(iv) $300 billion

Explanation:

Income, Y = $1,500 billion

Government spending, G = $260 billion

Taxes, T = $180 billion,

Investment spending, I = $300 billion

As Y = C + G + I

Consumption spending, C = $1,500 - $260 - $300

                                            = $940 billion

Private savings = Y - T - C

                          = $1,500 - $180 - $940

                          = $380 billion

Public saving = T - G

                      = $180 - $260

                      = -$80 billion

National saving = private + public

                          = $380 - $80

                          = $300 billion