In a closed economy, how does national saving compare with investment?
A) National saving is usually greater than investment.
B) National saving is equal to investment.
C) National saving is usually less than investment because of the leakage of taxes.
D) National saving is usually less than investment.

Question

Quizplus · Accepted Answer

In a closed economy, there are no international transactions involving saving and investment, so national saving and investment must be equal. This is because saving either goes towards investment or remains idle, and investment either comes from saving or is financed through borrowing, which is not considered in this scenario. Therefore, national saving is always equal to investment in a closed economy.

In a Closed Economy, How Does National Saving Compare with Investment