Question

In a small, closed economy, national income (GDP) is $350.00 million for the current month. Individuals have spent $100.00 million on the consumption of goods and services. They have paid a total of $60.00 million in taxes, and the government has spent $75.00 million on goods and services this month. Use this information and the national income identity to answer the questions.
1. How much is spent on investment in this economy? investment?
2. What is national saving in this economy?
3. How are investment and national saving related in an economy like this?
a. National saving equals investment. Investment is a component of national saving.
b. National saving is always less than investment.
c. They are unrelated.

Answer 1

Answer:

1. Investment spending is 175 million

2. National Saving is 175 million

3. Saving is the same as investment

Explanation:

Y = 350.00; C = 100.00; T = 60.00; G = 75.00

1. I = Y - C - G = 175.00

2. S = I = 175.00

3. Closed economy, national saving equals investment (no import export means no saving or debt with rest of world)