If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

Question

Quizplus · Accepted Answer

In a closed economy, private saving plus government saving (which is negative in the case of a deficit) equals investment. Therefore, if investment is $12,000 and the government deficit is $2,000, private saving must be $14,000 ($12,000 investment + $2,000 to cover the government deficit).

If, for an Imaginary Closed Economy, Investment Amounts to $12,000