In a closed economy, income equals:
A) consumption plus investment spending.
B) savings plus investment.
C) savings minus investment.
D) consumption minus investment spending.

Question

Quizplus · Accepted Answer

In a closed economy (meaning no international trade), income is equal to the sum of consumption and investment spending. This is because, in a closed economy, all output produced is ultimately either consumed or invested, with no net exports. Therefore, everything produced is either consumed or invested. Thus, income equals consumption plus investment spending.

In a Closed Economy, Income Equals