In a closed economy, if Y, C, and T remained the same, a decrease in G would
A)reduce private saving and public saving.
B)increase private saving but not public saving.
C)increase public saving but not private saving.
D)increase neither private nor public saving.

Question

Quizplus · Accepted Answer

In a closed economy, if government spending (G) decreases while income (Y), consumption (C), and taxes (T) remain the same, public saving (which is T - G) would increase because the government is spending less. Private saving, determined by income, consumption, and taxes, would not be directly affected by a change in G, assuming no immediate change in Y, C, or T.

In a Closed Economy, If Y, C, and T Remained