Question

In an open economy, government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was: a net capital inflow of $10 billion. a net capital outflow of $10 billion. capital inflows of $10 billion and capital outflows of $20 billion. a trade surplus of $20 billion and a financial deficit of $20 billion.

Answer 1

A net capital inflow of $10 billion.

Step-by-step explanation:

Given that,

Government spending = $30 billion,

Consumption = $70 billion,

Taxes = $20 billion,

GDP = $100 billion

Investment spending = $10 billion

Y = Consumption + Investment spending + Government spending

= (Consumption - Taxes) + $10 billion + $30 billion

= ($70 billion - $20 billion) + $10 billion + $30 billion

= $50 billion + $10 billion + $30 billion

= $90 billion

As the amount of GDP is greater than the value of income (Y). Hence, there is a net inflow of capital:

= GDP - Y

= $100 billion - $90 billion

= $10 billion