Question

Statistics

Posted 4 months ago

```
Elements of national income accounting can be abbreviated as shown in the table below.
\begin{tabular}{llllllll}
Abbreviation & Y & C & T & G & I & NX & NCI \\
\hline Meaning & \begin{tabular}{l}
national \\
income
\end{tabular} & consumption & taxes & government & investment & net & net \\
& & & & spending & & exports & capital \\
& & & & & & & inflows
\end{tabular}
Which of the following equations represents the relationship between savings and investment in a closed economy?
Choose 1 answer:
(A) $(Y-C-T)+(T-G)+N C I=I$
(B) $N C I=I$
(C) $(Y-C-T)+(T-G)=I$
(D) $T-G=I$
() $Y-C-T=I$
```

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Answer from Sia

Posted 4 months ago

Solution by Steps

step 1

In a closed economy, net exports (NX) and net capital inflows (NCI) are zero. Therefore, the equation simplifies to: $Y = C + I + G$

step 2

Rearrange the equation to solve for investment (I): $I = Y - C - G$

step 3

National savings (S) in a closed economy is defined as the sum of private savings $(Y - C - T)$ and public savings $(T - G)$. Therefore, $S = (Y - C - T) + (T - G)$

step 4

Substitute the expression for national savings (S) into the investment equation: $S = I$

step 5

The correct equation representing the relationship between savings and investment in a closed economy is: $(Y - C - T) + (T - G) = I$

C

Key Concept

Savings and Investment Relationship in a Closed Economy

Explanation

In a closed economy, the sum of private and public savings equals investment. This is represented by the equation $(Y - C - T) + (T - G) = I$.

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