In a closed economy, if the goods market is in equilibrium, national saving is $2 trillion, national consumption is $7 trillion, and government purchases are $2.5 trillion, then GDP equals
A)$7 trillion.
B)$9.5 trillion.
C)$11.5 trillion.
D)Not enough information has been provided to determine the answer.

Question

Quizplus · Accepted Answer

In a closed economy, GDP can be represented as the sum of consumption (C), investment (I), and government purchases (G). When the goods market is in equilibrium, national saving equals investment. Given that national saving is $2 trillion, government purchases are $2.5 trillion, and national consumption is $7 trillion, GDP can be calculated as the sum of C, I (which equals national saving in this case), and G: $7 trillion + $2 trillion + $2.5 trillion = $11.5 trillion.

In a Closed Economy, If the Goods Market Is in Equilibrium