Question

A closed economy has income of $1,000, government spending of $200, taxes of $150, and investment of $250. What is private saving?
a. $100
b. $200
c. $300
d. $400

Answer 1

Answer: c. $300

Explanation:

Private Saving is income less taxes and consumption so is calculated by the formula;

= Y - C - T

= Income - Consumption - Taxes

Find Consumption

Y - C - G = I

Income - Consumption - Government spending = Investment

1,000 - C - 200 = 250

C = 1,000 - 200 - 250

C = $550

Private Saving is therefore;

= 1,000 - 550 - 150

= $300