Question

The country of Yokovia does not trade with any other country. Its GDP is $20 billion. Its government collects $2 billion in taxes. Consumption equals $15 billion and investment equals $2 billion. What is public saving in Yokovia, and what is the value of the goods and services purchased by the government of Yokovia? a. -$2 billion and $1 billion. b. $1 billion and $1 billion. c. -$1 billion and $3 billion. d. -$2 billion and $3 billion.

Answer 1

c. -$1 billion and $3 billion.

Step-by-step explanation:

GDP = C + I + G

20 = 15 + 2 + G

G = 20 - 15 - 2 = 3

The government spending is 3 billion. which makes only option c or d correct.

Now we need to solve for public savings:

Taxes - Goverment Spending = Public savings

2 - 3 = -1

the government runs with a 1 billion deficit.

This makes option c correc