Question

Consider the closed economy with C = 800, G = 250, S = 100, and the private saving = -50 (notice “-“).

2.a. Answer the total income and the investment.

Total income:

Investment:



2.b. Answer the tax revenue and the public saving. Does the public saving increase or decrease the national saving?

Tax revenue:

Public saving:

Increase or Decrease?

Answer 1

Total income

$Y=C+G+S$

$=800+250+100-150$

$=1000$

Investment

$I=Y-G-C$

$=1000-800-250$

$=-50$

Public saving decreases the national saving