Scenario 13-1. Assume the following information for an imaginary, closed economy. $$\begin{array} { l }
\text { GDP } = \$ 120,000 ; \text { consumption } = \$ 70,000 ; \text { private savng } = \$ 9,000 \text {; } \
\text { national saving } = \$ 12,000
\end{array}$$
-Refer to Scenario 13-1. For this economy, government purchases amount to
A)$12,000.
B)$18,000.
C)$28,000.
D)$38,000.

Question

Scenario 13-1. Assume the following information for an imaginary, closed economy. $$\begin{array} { l } 
\text { GDP } = \$ 120,000 ; \text { consumption } = \$ 70,000 ; \text { private savng } = \$ 9,000 \text {; } \
\text { national saving } = \$ 12,000
\end{array}$$
-Refer to Scenario 13-1. For this economy, government purchases amount to
A)$12,000.
B)$18,000.
C)$28,000.
D)$38,000.

Quizplus · Accepted Answer

In a closed economy, GDP = Consumption + Investment + Government Purchases. National saving is equal to private saving plus public saving. Given that national saving is $12,000 and private saving is $9,000, public saving (government budget surplus) is $3,000. Therefore, government purchases can be calculated as: GDP - Consumption - National Saving = $120,000 - $70,000 - $12,000 = $38,000.

Scenario 13-1 -Refer to Scenario 13-1