Question

Using the National and Income and Product Account GDP definition to explain how the following are measured: a) Private Savings b) National Savings c) Gross Savings

Answer 1

GDP(Gross Domestic Product) which is mainly used to measure the economic value of the activities in a country.The national account contains the information about GDP components, employment details, savings as well as consumption details etc.

Private saving : Taxes should be paid by each and every individuals to the government for the better development of the country. The amount of money or income which is left after paying the taxes to the government and meeting each and everyones individual needs are known as the private savings.For measuring private saving ,first consider the total income of a person(national incomeo or GDP) and subtract the tax that they pay to the government and the money they spend for their consumption from the total income.

National saving : it is a kind of saving which is a combination or sum of both public saving as well as private saving. Where private saving is a kind of saving which is left after paying the taxes as well as meeting the individual needs. Public saving is a kind of saving which is left with the government after meeting needs of the people ( eg : for road construction works).National saving can be measured by adding both public saving and private saving.

Gross saving : Gross domestic saving can be calculated by subtracting the total amount of consumption expenditure from GDP.In gross national saving it includes personal saving,business savings, government savings but it doesn't include foreign saving .