a) Who in the economy provides private saving? b. Why has public saving been negative in...
a) Who in the economy provides private saving?
b. Why has public saving been negative in the United States in most recent years?
c. In a closed economy (no imports or exports), what happens to investment if private saving stays constant and public saving decreases?
Homework Answers
A) Private savings are provided by households, who save a portion of their disposable income which they do not consume.
B) Public saving refers to Tax revenue minus government spending. It has become negative because of falling tax revenued and rising government expenditure, making G > T
C) If Private saving remains unchanged but Public saving decreases, it means the government is spending more than it is earning and thus investment would remain unchanged since investment comes from private savings and if private saving are unchanged, then so would investment
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