Final answer:
National saving and private saving would only be equal with a zero government budget deficit or if the government budget deficit equals the government surplus options (2,4), an impossible scenario.
Step-by-step explanation:
In the case of a closed economy, there could only be situations where national saving and private saving are equal if the government's budget deficit is zero, meaning there is no government borrowing or surplus, or in the hypothetical and impossible case where the budget deficit equals the budget surplus which cancels each other out.
For the explanation, we can use the example of a closed economy with a budget surplus of 1,000. Here, we can write the national saving and investment identity as: National Saving = Private Saving + Budget Surplus, which can be written numerically as S = 4,000 (Private Saving) + 1,000 (Budget Surplus).
Since the investment is 5,000, the national saving matches this, indicating a balanced situation where the investment is fully funded by domestic savings.
To ascertain the balance of trade, we consider that for a closed economy, the balance of trade should be zero; however, if this economy were open, the equation National Saving = Investment + Net Exports would apply. Given that national saving exceeds investment by 1,000, this surplus would translate to a trade surplus of 1,000, as it indicates that the nation is exporting more capital than it is importing.
If the budget surplus becomes a deficit of 1,000, private saving remains at 4,000, and investment is still 5,000, the new identity becomes S - (G - T) = I or 4,000 - 1,000 = 5,000. This scenario indicates that the balance of trade will shift to zero, because the domestic saving now fully matches the investment without any surplus to export, assuming the closed economy situation remains.