If 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 ______.Group of answer choicesincreases; increasesdoes not change; decreasesincreases; decreasesdoes not change; increases
Question
If household saving decreases by 4 million and the government budget deficit decreases by $4 million, then private saving ____ and public saving ______.Group of answer choicesincreases; increasesdoes not change; decreasesincreases; decreasesdoes not change; increases
Solution
The answer is: does not change; increases.
Here's why:
Private saving is the sum of household saving and business saving. If household saving decreases by 4 million, these two changes offset each other, so private saving does not change.
Public saving is the opposite of the government budget deficit. If the government budget deficit decreases by 4 million.
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