In the small closed economy of San Lucretia, the currency is the denar. Statistics for last year show that private saving was 60 billion denars, taxes were 70 billion denars, government purchases of goods and services were 80 billion denars, there were no transfer payments by the government, and GDP was 400 billion denars. What was investment in San Lucretia?

Question

Quizplus · Accepted Answer

In a closed economy, investment (I) is equal to total savings. Total savings is the sum of private saving and public saving. Public saving is taxes minus government spending. Here, public saving is 70 - 80 = -10 billion denars. Total savings is 60 + (-10) = 50 billion denars, which equals investment.

In the Small Closed Economy of San Lucretia, the Currency