Question

In a small, closed economy, national income (GDP) is $350.00 million for the current quarter. 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 quarter. Use this information and the national income identity to answer the questions. How much is spent on investment in this economy?

Answer 1

Answer:

Investment 175

Explanation:

Calcualted from Income:

GDP = C + G + I

350 =  100 + 75 + I

I = 350 - 100 - 75

I = 175

The income comes from consumption, the goverment or through invesment

Calculated from savings: Investment = Savings

Savings = public saving + private savings

Savings = (taxes - gov spending) + (income - consumption - taxes)

Savings =                (60 - 75 )        +        (350 - 100 - 60)

Savings =    -15 + 190 = 175

To invest, we need to save, the public savings is the difference between the taxes colelcted and the gov spending

Then, the private savings are what is left after consuming and paying taxes.