Where I is planned investment, S is saving, and Y is gross domestic product (GDP).
I = I 0 = 80 (6.3)
S = -80 + .4Y (6.4)
-Refer to equations (6.3) and (6.4). The equilibrium saving in a private sector closed economy will be:

Question

Quizplus · Accepted Answer

In a closed economy, equilibrium occurs when planned investment (I) equals saving (S). From the given equations, I = 80. Setting I equal to S gives 80 = -80 + .4Y. Solving for Y gives Y = 400. Substituting Y = 400 into the saving equation S = -80 + .4(400) gives S = 80.

Where I Is Planned Investment, S Is Saving, and Y