In a closed economy, what does private savings equal?

In a closed economy, private savings can be defined by the income available to households after accounting for taxes and consumption. The formula to calculate private savings is derived from the national income accounting identity.

Starting with total output or income, represented as Y, when households receive their income, they also pay taxes, denoted as T. After taxes are deducted, the disposable income becomes Y - T. This is the amount that households have available to either consume or save.

From this disposable income, if households consume a certain amount, represented as C, then the remainder constitutes private savings. Thus, the equation can be represented as:

Private Savings = Disposable Income - Consumption
Private Savings = (Y - T) - C
This simplifies to Private Savings = Y - T - C.

Therefore, private savings is accurately expressed as Y - T - C, highlighting the relationship between income, taxes, and consumption in determining the savings of households in an economy.