Question

What is investment in a closed economy if you have the following economic data?Y = $10 trillionC = $5 trillionTR = $2 trillionG = $2 trillion

A) $2 trillion
B) $3 trillion
C) $5 trillion
D) cannot be determined without information on taxes (T)

Answer 1

Investment in a closed economy can be determined using the formula Y = C + I + G + (X - M). In this case, investment is $3 trillion.

Step-by-step explanation:

Investment in a closed economy can be determined by the formula: Y = C + I + G + (X - M), where Y represents GDP (the dollar value of all final goods and services produced within a country), C represents consumption spending, I represents investment spending, G represents government purchases, X represents exports, and M represents imports.

In the given data, Y = $10 trillion, C = $5 trillion, G = $2 trillion, and M = $40 billion (since imports are given). We can rearrange the formula to solve for I: I = Y - C - G - (X - M).

Substituting the given values, I = $10 trillion - $5 trillion - $2 trillion - ($20 billion - $40 billion) = $3 trillion. Therefore, the investment in a closed economy is $3 trillion (option B).