Question

GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is national saving? $3 trillion $3.5 trillion $2 trillion $2.5 trillion

Answer 1

The correct option is $3.5 trillion

Step-by-step explanation:

National saving is what is left in an economy after having paid for consumption expenditure and taxes.

National saving=Income-Consumption-Taxes

Income here is the GDP of $12 trillion

Consumption is $8 trillion

Taxes is $0.5 trillion

National saving=$12 trillion-$8 trillion-$0.5 trillion

national saving=$3.5 trillion

$3.5 trillion left after taking taxes and consumption,invariably that is the national saving in the economy for that particular year

The government expenditure of $2 trillion is not relevant for the requirement in this question

Answer 2

$2 trillion

Step-by-step explanation:

National saving = private saving + pubic saving

Public saving = Tax - Government Spending

$0.5 trillion - $2 trillion = -$1.5 trillion

Private saving = income - taxes - Consumption

$12 trillion - $8 trillion- $0.5 trillion = $3.5 trillion

National saving = $3.5 trillion -$1.5 trillion = $2 trillion

I hope my answer helps you