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Answer :
Answer:
Option A.
Explanation:
Given information:
GDP = $11 trillion
Consumption = $7 trillion
Taxes = $2.5 trillion
Surplus = $1 trillion
The formula for private saving is
[tex]\text{Private saving}=GDP-Tax-Consumption[/tex]
[tex]\text{Private saving}=11-2.5-7[/tex]
[tex]\text{Private saving}=1.5[/tex]
The formula for national saving is
[tex]\text{National saving}=GDP-Consumption-\text{Government purchase}[/tex]
[tex]\text{National saving}=11-7-(2.5-1)[/tex]
[tex]\text{National saving}=11-7-1.5[/tex]
[tex]\text{National saving}=2.5[/tex]
The private saving and national saving are $1.5 trillion and $2.5 trillion, respectively.
Therefore, the correct option is A.
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Rewritten by : Jeany
Final answer:
For a closed economy with the given figures, private saving is calculated as $1.5 trillion and national saving is $2.5 trillion, the sum of private saving and the government surplus.
Explanation:
To calculate private saving and national saving in a closed economy, we use the following identities: private saving is equal to what households retain from their disposable income after consumption (disposable income is total income minus taxes), and national saving is the sum of private saving and the government surplus. In the given scenario, GDP is given as $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion, and the government runs a surplus of $1 trillion. The calculation for private saving is:
Private Saving = GDP - Taxes - Consumption = $11 trillion - $2.5 trillion - $7 trillion = $1.5 trillion.
Since the government surplus is $1 trillion, we calculate national saving by adding the government surplus to private saving:
National Saving = Private Saving + Government Surplus = $1.5 trillion + $1 trillion = $2.5 trillion.
Therefore, the answer is option 1: Private saving is $1.5 trillion and national saving is $2.5 trillion.
