Suppose that GDP is equal to 1,000, national saving is equal to 200, the current account deficit is equal to 100, and the government budget deficit is equal to 50. Private savings must equal
A)250.
B)150.
C)300.
D)350.
E)200.

Question

Quizplus · Accepted Answer

Private savings can be calculated using the formula: National Saving = Private Saving + Government Saving. Here, Government Saving is negative because of the budget deficit, so it's -50. Given that National Saving is 200, we can rearrange the formula to solve for Private Saving: 200 = Private Saving - 50. Solving for Private Saving gives us 250.

Suppose That GDP Is Equal to 1,000, National Saving Is