Question

Which of the following statements is correct?

A) The total income in the economy that remains after paying for consumption and government purchases is called private saving.
B) The sum of private saving and national saving is called public saving.
C) For a closed economy, the sum of private saving and public saving must equal investment.
D) For an open economy, the sum of consumption, national saving, and net capital inflow must equal investment.

Answer 1

C) For a closed economy, the sum of private saving and public saving must equal investment.

Step-by-step explanation:

In a closed economy, public savings (or budget surplus) = tax revenue - government spending

Private savings = aggregate spending - taxes + government transfers - private consumption

National savings = investment = public savings + public savings

For a closed economy, the savings-investment spending identity states that national savings and investment spending are always equal.