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Scenario: A Small Economy
Suppose there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year.
-(Scenario: A Small Economy) Look at the scenario A Small Economy. What is the level of private saving?

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Quizplus · Accepted Answer

Private saving is the difference between income and consumption spending. In this scenario, consumption spending is $18 trillion, and GDP is $25 trillion, so private saving is $25 trillion - $18 trillion = $7 trillion. However, since there is no government, there is no public saving or debt.

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