Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. There is a new government and it imposes taxes on its citizens to spend on infrastructure. Taxes and government spending are both $2 trillion. What is the level of investment spending now?
A) $7 trillion
B) $5 trillion
C) $18 trillion
D) -$4 trillion
Correct Answer:
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