Final Answer:
In a closed economy, the value of private saving and public saving are as follows:
Private saving = 0 trillion
Public saving = 3 trillion
Step-by-step explanation:
In a closed economy, the formula for GDP (Y) is given by the sum of consumption (C), investment (I), and government spending (G).
The GDP can also be looked at as the sum of private saving (S_private), public saving (S_public), and investment (I).
Since we are talking about a closed economy, we do not consider net exports, which would be part of the equation in an open economy.
The formula for private saving is the income that households have left after paying taxes (T) and consuming (C). So, the private saving can be calculated as follows:
S_private = Y - T - C
According to the information provided:
Y = 12 trillion (GDP)
T = 3 trillion (taxes)
C = 9 trillion (consumption)
Now let's calculate private saving:
S_private = Y - T - C
S_private = 12 trillion - 3 trillion - 9 trillion
S_private = 0 trillion
So, the value for private saving is 0 trillion.
Public saving is the amount of tax revenue that the government has left after making transfer payments (TR) and government spending (G). However, the problem does not give us a value for government spending (G) directly, but we can deduce it. Public saving can be calculated as:
S_public = T - (G + TR)
Given that Y=C+I+G and we are looking for (G + TR), we can rewrite it as:
Y - C - I = G + TR
Now we can calculate (G + TR):
G + TR = Y - C - I
G + TR = 12 trillion - 9 trillion - 3 trillion
G + TR = 0 trillion
Now since we have G + TR and T:
S_public = T - (G + TR)
S_public = 3 trillion - 0 trillion
S_public = 3 trillion
Therefore, the value for public saving is 3 trillion. To summarize:
Private saving = 0 trillion
Public saving = 3 trillion