Assume that an economy is in equilibrium with a budget deficit of $130 billion, positive net exports of $453 billion, and savings equal to $1,550 billion. If taxes are zero, then planned investment spending must be equal to:

Question

Quizplus · Accepted Answer

In equilibrium, savings (S) = investment (I) + net exports (NX) + budget deficit. Given S = $1,550 billion, NX = $453 billion, and budget deficit = $130 billion, solve for I: $1,550 = I + $453 + $130, so I = $967 billion.

Assume That an Economy Is in Equilibrium with a Budget