If household saving decreases by $3 million, business saving increases by $1 million, and the government budget deficit increases by $2 million, then private saving ______ and public saving ______.
A) increases; does not change
B) increases; decreases
C) does not change; increases
D) decrease; decreases

Question

Quizplus · Accepted Answer

Private saving consists of household and business savings. In this case, the decrease in household savings was not offset enough by the increase in business saving, so private savings decreased. Public saving depends on the budget surplus. In this case, the government increased its deficit by $2 million, so public saving also decreased.

If Household Saving Decreases by $3 Million, Business Saving Increases