15 In an open economy suppose that GDP is 12 trillion Consum

15.

In an open economy suppose that GDP is $12 trillion. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion and imports are $3 trillion.

How much is national saving?

Solution

Disposable income = Income (Y) - taxes = $(12 - 0.5) trillion = $ 11.5 trillion.

Private savings = Disposable income - Comsumption = $ (11.5 - 8) trillion = $3.5 trillion

Public savings = Tax - Government spending = $ (0.5 - 2) trillion = - $ 1.5 trillion

National savings = Public savings + Private Savings

= $ ( - 1.5 + 3.5) trillion = $ 2 trillion.

Answer-option A