The country of Bienmundo does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year, collects $7 billion in taxes, and provides $3 billion in transfer payments to households. Private saving in Bienmundo amounts to $5 billion. What are consumption and investment in Bienmundo?
A)$18 billion and $5 billion, respectively
B)$21 billion and $4 billion, respectively
C)$13 billion and $7 billion, respectively
D)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

GDP = C + I + G. Given GDP = $30 billion, G = $5 billion, and T = $7 billion with transfer payments of $3 billion, disposable income is $26 billion. Private saving is $5 billion, so consumption is $21 billion. Investment is GDP - C - G = $4 billion.

The Country of Bienmundo Does Not Trade with Any Other