2. Suppose GDP is $10,000 trillion, taxes are $1,500 trillion, consumption is $6,000 trillion, and government expenditure is $1,700 trillion. Investment is a function of the interest rate such that it is represented by the following equation (in trillions): 3,300 Where is the world real interest rate, expressed as a percentage. Use this information to calculate private savings, public savings, and national savings. I = - 100 * i

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Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.