In a closed economy,national savings will be:
A)lower than private savings if the government runs a deficit.
B)higher than private savings if the government runs a deficit.
C)lower than private savings if the government runs a surplus.
D)None of these is true.

Question

Quizplus · Accepted Answer

National savings is the sum of private savings and government savings. If the government runs a deficit, it means they are spending more than they are collecting in revenue, which would decrease government savings and therefore decrease national savings relative to private savings. Thus, national savings will be lower than private savings in this case.

In a Closed Economy,national Savings Will Be