The total value of saving in the economy must equal the total value of investment. Assume a closed economy, where:
I = Investment,
S = Spvt + Spub,
Spvt = Private Saving,
Spub = Public Saving,
C = Consumption Expenditure,
G = Government Expenditure ,
Y = GDP,
TR = Government Transfers.
A. S = Y + T - TR - G
B. I = Y + TR - C - T
C. S = Y - C - G
D. I = Y + TR - C - G
Answer: C. S = Y - C - G
I = Investment,
S = Spvt + Spub,
Spvt = Private Saving,
Spub = Public Saving,
C = Consumption Expenditure,
G = Government Expenditure ,
Y = GDP,
TR = Government Transfers.
Which one of the following expressions shows the investment-saving equality
A. S = Y + T - TR - G
B. I = Y + TR - C - T
C. S = Y - C - G
D. I = Y + TR - C - G
Answer: C. S = Y - C - G