If national saving in a closed economy is greater than zero, which of the following must be true?
A) Either public saving or private saving must be greater than zero.
B) Investment is positive.
C) Y - C - G 0.
D) All of the above are correct.

Question

If national saving in a closed economy is greater than zero, which of the following must be true?
A) Either public saving or private saving must be greater than zero.
B) Investment is positive.
C) Y - C - G > 0.
D) All of the above are correct.

Quizplus · Accepted Answer

If national saving in a closed economy is greater than zero, it means that S > I, where S is national saving and I is investment.

From the national accounting identity, we have:

Y = C + I + G

Substituting S for Y - C - G, we get:

S = I

Therefore, investment must be positive (B).

Since S > I, it means that either public saving or private saving must be greater than zero, so A is also correct.

Finally, substituting S for Y - C - G in the national accounting identity, we get:

Y - C - G = I

Therefore, Y - C - G must be greater than zero, so C is also correct.

Hence, the correct answer is D.

If National Saving in a Closed Economy Is Greater Than