Scenario 18-1.Assume the following information for an imaginary,closed economy.

-Refer to Scenario 18-1.For this economy,investment amounts to
A) $4,000.
B) $9,000.
C) $12,000.
D) $16,000.

Question

Scenario 18-1.Assume the following information for an imaginary,closed economy.
 
-Refer to Scenario 18-1.For this economy,investment amounts to
A) $4,000. 
B) $9,000. 
C) $12,000. 
D) $16,000.

Quizplus · Accepted Answer

Investment in a closed economy equals the sum of national saving and net capital inflow. In this scenario, national saving is $4,000 and net capital inflow is $8,000 ($20,000 imports - $12,000 exports = -$8,000 net exports which is offset by a positive net capital inflow of $8,000). Therefore, investment is $12,000 ($4,000 national saving + $8,000 net capital inflow = $12,000).