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o-na [289]
3 years ago
6

The country of Growpaw does not trade with any other country. Its GDP is $20 billion. Its government purchases $3 billion worth

of goods and services each year, collects $6 billion in taxes, and provides $2 billion in transfer payments to households. Private saving in Growpaw is $4 billion. What is investment in Growpaw?a.$5 billionb.$4 billionc.$3 billiond.$2 billion
Business
1 answer:
Anna [14]3 years ago
8 0

Answer:

option a) 5 billion

Explanation:

Data provided in the question:

GDP = $20 billion

Cost of goods and services = $3 billion

Tax collected = $6 billion

Transfer payments to households = $2 billion

Private saving in Growpaw = $4 billion

Now,

Disposable income = GDP - taxes + transfer payments

=$20 billion - $6 billion + $2 billion

= $16 billion

Consumption = Disposable income - Savings

= $16 billion - $4 billion

= $12 billion

Thus,

Investment = GDP - consumption - government purchases

= $20 billion - $12 billion - $3 billion

= $5 billion

Hence,

the correct answer is option a) 5 billion

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