f household saving decreases by $4 million, business saving increases by $4 million and the government budget deficit decreases by $4 million, then private saving ____ and public saving ______.
Question
f household saving decreases by 4 million and the government budget deficit decreases by $4 million, then private saving ____ and public saving ______.
Solution
Private saving remains the same and public saving increases.
Here's why:
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Private saving is the sum of household saving and business saving. If household saving decreases by 4 million, the net effect is zero. Therefore, private saving remains the same.
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Public saving is the opposite of the government budget deficit. If the government budget deficit decreases by 4 million.
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