In a closed economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, and GDP was $110 billion this year. Investment spending was $10 billion. As a result:

Question

Quizplus · Accepted Answer

Private savings is equal to disposable income minus consumption, or (GDP - taxes) - consumption. In this case, private savings would be ($110 billion - $20 billion) - $70 billion = $20 billion. The government's budget balance would be government spending minus taxes, or $30 billion - $20 billion = $10 billion, but the question is asking specifically about private savings.

In a Closed Economy Government Spending Was $30 Billion, Consumption