Question

In a closed economy, if Y remained the same, but G rose, T rose by the same amount as G, and C fell but by less than the increase in T, what would happen to private and national saving

Answer 1

Answer:

private saving would rise and national saving falls

Explanation:

private saving is income - consumptiioon= Y-C

if consumption c falls, private saving is going ton rise

public saving is T-G

as G goes up, T-G which is public saving would reduce or fall.

Given that the fall in c is smaller than the rise in G, the rise in private saving would smaller than the fall in public saving.

national saving  is change in private saving + change in public saving

given that  change in private saving is less than that of public saving, national saving would be negative.