In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?
A)Private saving is equal to government expenditures.
B)Public saving is equal to investment.
C)After paying their taxes and paying for their consumption,households have nothing left.
D)The government's tax revenue is equal to its expenditures.

Question

Quizplus · Accepted Answer

In a closed economy, government saving is equal to zero (since there are no foreign transactions). Therefore, if the government's tax revenue is equal to its expenditures, it implies that public saving is also equal to zero. In this case, national saving (which is the sum of private and public saving) will be equal to private saving.

In Which of the Following Cases Would It Necessarily Be