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In a closed economy, the values for GDP, consumption spending, investment spending, transfer payments, and taxes are as follows:

- Y = $15 trillion
- C = $10 trillion
- I = $4 trillion
- TR = $1 trillion
- T = $4 trillion

Using the information above, what is the value of private saving and public saving?

A. Private saving equals $10 trillion and public saving equals $4 trillion.

B. Private saving equals $2 trillion and public saving equals $1 trillion.

C. Private saving equals $2 trillion and public saving equals $2 trillion.

D. Private saving equals $4 trillion and public saving equals $10 trillion.

Answer :

The value of private saving is $1 trillion and the value of public saving is $3 trillion.

to calculate private saving and public saving, we can use the formula:

private saving (sprivate) = disposable income (y - t) - consumption (c)

public saving (spublic) = tax revenue (t) - transfer payments (tr) - government spending (g)

given the values provided:

y = $15 trillion

c = $10 trillion

i = $4 trillion

tr = $1 trillion

t = $4 trillion

let's calculate the private saving:

sprivate = (y - t) - c

= ($15 trillion - $4 trillion) - $10 trillion

= $11 trillion - $10 trillion

= $1 trillion

now, let's calculate the public saving:

spublic = t - tr - g

= $4 trillion - $1 trillion - $0 trillion

= $3 trillion so, the correct is:

c. private saving equals $1 trillion and public saving equals $3 trillion.

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