Question

Public saving is equal to national saving minus private saving. True or false

Answer 1

True.

National savings is the sum of public savings and private savings.

Ie, National savings=Public savings +Private savings.

National income(Y) is the sum of consumption (C),Investment or national savings(I) and government expenditure (G)

Ie, Y=C+I+G

Therefore,

National savings, I=Y-C-G

National savings can be split into public savings and private savings.

I=(Y-T+TR-C) +(T-G-TR)

Public savings =Y-T+TR

Private savings =Y-T+TR-C

Where,

T=government revenue through taxes.

TR=Transfers paid by government to the consumers.

Public savings is also known as budget surplus.