In a closed economy with no government, the level of national saving is equal to the level of investment.Group of answer choicesTrueFalse
Question
In a closed economy with no government, the level of national saving is equal to the level of investment.
Group of answer choices
- True
- False
Solution
In a closed economy with no government, the statement is True.
Explanation:
-
In a closed economy, there are no exports or imports, meaning all economic activity occurs within the country.
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The lack of a government implies that there are no taxes or public spending influencing the economy.
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According to the national income accounting identity, in a closed economy, national saving (S) is equal to investment (I):
Thus, the level of national saving is indeed equal to the level of investment, confirming that the statement is true.
Similar Questions
The question below is based on the following equations, which refer to a model of a closed economy without a government sector:
In a closed economy, private saving, , is equal toA) I - (G - T).B) I + (G - T).C) I + (G + T).D) I - (G + T).E) I + (G - T) + C.
When economy decides to save the whole of its additional income, then value of investmentmultiplier will be
What is the impact on the national saving rate if the consumption and government share each increased by 5%?
Consider a closed economy with national saving of $2 trillion, consumption of $16 trillion, and government purchases of $5 trillion. What the economy's is GDP?
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