Assume a closed economy.If consumption spending is $6.2 trillion,investment spending is $2.5 trillion,net taxes are $1.5 trillion and total income is $11 trillion,how much must government purchases be?
A) $2.3 trillion
B) $0.8 trillion
C) $3.3 trillion
D) $7 trillion
E) cannot be determined without more information

Question

Assume a closed economy.If consumption spending is $6.2 trillion,investment spending is $2.5 trillion,net taxes are $1.5 trillion and total income is $11 trillion,how much must government purchases be?
A) $2.3 trillion
B) $0.8 trillion
C) $3.3 trillion
D) $7 trillion
E) cannot be determined without more information

Quizplus · Accepted Answer

In a closed economy, total income (Y) is equal to the sum of consumption (C), investment (I), and government purchases (G). Given Y = $11 trillion, C = $6.2 trillion, I = $2.5 trillion, and net taxes (T) = $1.5 trillion, we can find G by rearranging the equation: Y = C + I + G. Thus, G = Y - C - I = $11 trillion - $6.2 trillion - $2.5 trillion = $2.3 trillion.

Assume a Closed Economy