The country of Hykania does not trade with any other country.Its GDP is $20 billion.Its government purchases $3 billion worth of goods and services each year,collects $3 billion in taxes,and provides $2 billion in transfer payments to households.Private saving in Hyrkania is $4 billion.What is investment in Hyrkania?

Question

Quizplus · Accepted Answer

In a closed economy, GDP = C + I + G. Given GDP = $20 billion, G = $3 billion, and T = $3 billion with transfer payments of $2 billion, disposable income is $19 billion. With private saving of $4 billion, consumption is $15 billion. Thus, investment (I) = GDP - C - G = $20 billion - $15 billion - $3 billion = $2 billion.

The Country of Hykania Does Not Trade with Any Other