DP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion. How much is investment spending? $3.5 trillion $3 trillion $2.5 trillion $2 trillion

$2 trillion

Explanation:

GDP is the monetary value of all the goods manufactured and services made within the country for a specific period of time. It shows the economic condition of a country.

As per given data

Total GDP = $12 trillion

Consumption = $8 trillion

Govt. Spending = $2 trillion

Taxes = $0.5 trillion

Disposable income = GDP - Taxes = 12 Trillion - 0.5 trillion = $11.5 trillion

Private saving = Disposable Income - consumption = $11.5 trillion - 8 trillion = 3.5 trillion

Budget Balance  = Taxes - Govt. Spending = 0.5 trillion - $2 trillion = -1.5 trillion

Investment Spending = Private saving + budget balance = 3.5 trillion - 1.5 trillion = $2 trillion

The investment spending is $2 trillion, the last option given in the question.

Explanation:

The formula for GDP for a closed economy is given below:

GDP=C+I+G

where C is the consumption expenditure of the households given as $8 trillion

I is the investment spending in the economy which is unknown

G is government expenditure given as $2 trillion

12 trillion=$8 trillion+I+$2 trillion

12 trillion=10 trillion+I

I=$12 trillion-$10 trillion

I =$2 trillion

The correct answer is $2 trillion , the last option

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