The country of Hrykania does not trade with any other country. Its GDP is $20 billion. Its government purchases $3 billion worth of goods and services each year, collects $3 billion in taxes, and provides $1 billion in transfer payments to households. Private saving in Hyrkania is $4 billion. What is investment in Hyrkania?
A) $1 billion
B) $2 billion
C) $3 billion
D) $4 billion

Question

Quizplus · Accepted Answer

Investment is equal to saving plus the government budget deficit. In this case, saving is $4 billion and the government budget deficit is $3 billion - $3 billion + $1 billion = $1 billion. Therefore, investment is $4 billion + $1 billion = $5 billion.

The Country of Hrykania Does Not Trade with Any Other