You are given the following information about an economy:
Net government saving in this economy is equal to

Question

You are given the following information about an economy: 
Net government saving in this economy is equal to

Quizplus · Accepted Answer

Net government saving is calculated by subtracting total government spending from total government revenue. The information provided does not include either of these values, so we cannot calculate net government saving directly. However, we can use the fact that in a closed economy (one with no international trade), savings must equal investment. Since net investment is given as 0, we can conclude that net savings in the economy is also 0. This means that total government revenue must equal total government spending. We know that government transfers are 100 and government consumption is 120, so total government spending is 220. We also know that taxes are 230, so total government revenue is 230. Therefore, net government saving is equal to total government revenue minus total government spending, or 230-220=10. However, the question is asking for net government saving, not net private saving, so we need to reverse the sign, giving us a final answer of -10.

You Are Given the Following Information About an Economy