The total value of saving in the economy must equal the total value of investment. Assume a closed economy, where: 1 = Investment, S = Sprivate + Spublic Sprivate = Private Saving, Spublic = Public Saving, C = Consumption Expenditure, G = Government Expenditure, Y = GDP, TR = Government Tranfers. Which one of the following expressions shows the investment-saving equality? O A. S=Y-C-G Ô B. |=Y+ TR-C- O C. s=Y+T- TR-G OD. I=Y+TR-C-G Click to select your answer.
Answer
“A” Investment = Total output – consumption – government expenditure. Saving = Total output – consumpiton – government expenditure.
Equation A shows that the investment and savings in the market are equal .