Question

Suppose that in a closed economy GDP is $14 trillion, consumption is $7 trillion, taxes are $4 trillion, and the government runs a $0 trillion budget. Based on this information, public saving is equal to $ trillion.

a) $3
b) $4
c) $7
d) $10

Answer 1

Public saving in a closed economy where the government runs a $0 trillion budget and taxes are $4 trillion is $0 trillion, as government spending equals tax revenue.

Step-by-step explanation:

The question "Suppose that in a closed economy GDP is $14 trillion, consumption is $7 trillion, taxes are $4 trillion, and the government runs a $0 trillion budget. Based on this information, public saving is equal to $ trillion" concerns calculating the level of public saving in a closed economy.

If the government runs a $0 trillion budget, this means that government spending is equal to taxes ($4 trillion). Public saving is the amount of tax revenue left after government spending, which would be $4 trillion - $4 trillion = $0 trillion. Therefore, the correct answer is not present in the options provided, and public saving in this case is $0 trillion.