Last quarter in a closed economy GDP was 100,000. Expenditures on capital goods such as business equipment and structures was 10,000, inventory rose 1,000, and new construction of homes was 5,000. Consumption was 65,000, taxes were 15,000. What was public saving?

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Quizplus · Accepted Answer

Public saving is calculated as taxes minus government spending. In a closed economy, GDP = Consumption + Investment + Government Spending. Here, Investment is 10,000 (capital goods) + 1,000 (inventory) + 5,000 (homes) = 16,000. So, Government Spending = GDP - Consumption - Investment = 100,000 - 65,000 - 16,000 = 19,000. Public saving = Taxes - Government Spending = 15,000 - 19,000 = -4,000.

Last Quarter in a Closed Economy GDP Was 100,000