Question

In a small, closed economy national income (GDP) is $600.00 million for the current quarter. Individuals have spent $250.00 million on the consumption of goods and services. They have paid a total of $100.00 million in taxes and the government has spent $200.00 million on goods and services this quarter. Use this information and the national income identity to answer the following questions. 1. How much does the economy spend on investment? Number 75 million dollars Incorrect. How can the national income

2. What is national saving in the economy? identity, GDP-C+l+G, be used to find investment? Number 75 million dollars
3. How are investment and national saving related in an economy like this?
National saving is always less than investment
Investment is a component of national saving.
They are unrelated.
National saving equals investment.

Answer 1

Answer and Explanation:

The computation is given below:

a. The economy spend is

GDP = Consumption + investment + government purchase

$600 = $250 + investment + $200

So, the investment is $150 million

b. The national saving is

Investment = national saving

= $150 million

c. In the closed economy, the national saving should be equivalent to the investment amount

So, the last option should be considered