Question

Assuming that taxes and net exports are zero, government purchases of goods and services are equal to $12, and gross private domestic investment is equal to $10, the equilibrium real gross domestic product will be" ___

Answer 1

Answer:

GDP= $22

Explanation:

The groos domestic product (GDP) formula is:

GDP= Consumption (C)+ Investment (I)+ Government expenditure (G)+ Net exports (exports-imports)

The problem gives the following information:

G= $12

I=$10

X-M= $0

We do not have information about consumption, then we assume is zero.

GDP= $0+$10+$12+$0

GDP=$22