Question

According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would

Answer 1

Question options :

a. raise both private and public saving.b. raise private saving and lower public saving.c. lower private saving and raise public saving.d. lower private and public saving.

Answer:

c. lower private saving and raise public saving.

Explanation:

National saving is total of private and public saving minus the country's consumption and government expenditure.

Private saving is income from households minus consumption and taxes.

Formula for public saving is T − G − TR which is government budget surplus through revenue from tax. This is revenue from tax minus government expenditure and transfers.