If the saving rate in an economy is 30 percent and the level of investment in the economy is $400,the GDP of the economy must be ________.

Question

Quizplus · Accepted Answer

The saving-investment identity states that savings must always equal investment in a closed economy. In this case, if the level of investment is $400 and the saving rate is 30%, the total income or GDP of the economy can be calculated as: 
GDP = Investment / Saving rate = $400 / 0.30 = $1,333.33. Therefore, the answer is B.

If the Saving Rate in an Economy Is 30 Percent