Saving–Investment equilibrium with government: Determine the condition on government expenditure. Context: Closed economy with government. Identity: (S − I) = (G − T) + (X − M). Full question: If an economy is in equilibrium where planned saving equals planned investment, what must be true of government expenditure? Choose the correct option.

Given data

• Equilibrium condition: Planned saving S equals planned investment I.
• Macroeconomic identity (with government and external): S − I = (G − T) + (X − M)

Concept / Approach
With planned S = I, left side is 0. If foreign balance is neutral for the question (X − M = 0, closed or balanced trade), then (G − T) must be 0.

Step-by-step
Start: S − I = (G − T) + (X − M) Given: S = I ⇒ S − I = 0 Assume: X − M = 0 (standard textbook closure unless specified) Hence: 0 = (G − T) ⇒ G = T

Common pitfalls
Ignoring the external balance term; the question defaults to the standard closed-economy implication.

Final Answer
Government expenditure equals tax revenue (balanced budget).