Consumer saving and business investment are the primary sources of imbalance in a wholly private and closed economy (that is,if there is no government and no foreign trade).
In a wholly private and closed economy,there is no government or trade sector; if saving does not equal investment,there must be a recessionary or inflationary GDP gap.

Question

Quizplus · Accepted Answer

In a wholly private and closed economy, saving and investment are the only channels for money flow, and any imbalance between them will cause a GDP gap. Without government intervention or foreign trade, there are no other sources of economic stimulus or damping. Therefore, the statement is true.

Consumer Saving and Business Investment Are the Primary Sources of Imbalance