What is mattress savings?
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Hiding money under the mattress is a classic way of describing someone who is thrifty. However, economists argue that literally putting money in your mattress would cause you to lose money in the long run. Explain why that would be, using the concept of opportunity cost.
National savings is equal to the sum of private savings and public savings. To make our notation a bit easier, we will call national savings S, private savings V, and public savings U. So in other words,
S = V + U.
If private savings 'V' = 0.75S and total savings 'S' equals $4.20 billion, solve for public and private savings.
Public savings: $ billion
Private savings: $ billion
If taxes increase by $500 and the MPC is 0.8, what is the change in consumption and private savings? What is the change in public savings? what is the change in total savings? What is the change in investment?