Question

Suppose you know that the equilibrium amount of investment in the global market is $10.4 trillion, the equilibrium interest rate is 5.5%, the income tax rate is 7%, and government spending accounts for 30% of global GDP. What is the equilibrium amount of global savings, in trillions?

Answer 1

10.4.

Explanation:

Given: the equilibrium amount of investment in the global market is $10.4 trillion.

the equilibrium interest rate is 5.5%, the income tax rate is 7%,

In loan-able funds market equilibrium investment should be equal to equilibrium savings. Hence global savings are also equal to $10.4 trillion.

Correct choice is 10.4.