Question

Consider the following data for a closed economy:Y = $12 trillionC = $8 trillionI= $2 trillionG = $2 trillionTR = $2 trillionT = $3 trillionRefer to Scenario 10-1. Based on the information above, what is the level of public saving?

A) $0
B) $1 trillion
C) $2 trillion
D) negative $1 trillion (a deficit of $1 trillion)

Answer 1

The level of public saving in a closed economy is $1 trillion.

Step-by-step explanation:

In a closed economy, public saving is equal to the difference between government revenue (T) and government spending (G) minus transfer payments (TR). In this case, the level of public saving can be calculated as:

Public Saving = (T - G) - TR
= ($3 trillion - $2 trillion) - $2 trillion
= $1 trillion

Therefore, the level of public saving in this closed economy is $1 trillion (option B).