Question

Suppose real GDP is $5,326 billion, taxes collected by the government are $504 billion, government spending is $695 billion, and consumption spending is $3,851 billion. This is a closed economy What is the value of private saving? Enter a whole number with no dollar sign and please do not include the word billion.

Answer 1

Private saving in a closed economy is calculated by subtracting taxes and consumption spending from the real GDP. In this scenario, with a real GDP of $5,326 billion, taxes of $504 billion, and consumption spending of $3,851 billion, the private saving amounts to $971 billion.

Step-by-step explanation:

To calculate the value of private saving in a closed economy using the provided data, we need to understand that private saving is equal to what households retain from their disposable income (income after taxes) minus what they spend on consumption. Disposable income can be found by subtracting taxes from the real GDP. Hence, the private saving formula is as follows:

Private Saving = real GDP - Taxes - Consumption Spending

Given the values:

Real GDP = $5,326 billion

Taxes = $504 billion

Consumption Spending = $3,851 billion

We can calculate private saving as:

Private Saving = $5,326 billion - $504 billion - $3,851 billion

Private Saving = $5,326 - $504 - $3,851

Private Saving = $971 billion

Thus, the value of private saving is 971 when expressed as a whole number without the word 'billion' or the dollar sign.