Question

In a closed economy suppose that GDP is $12 trillion, consumption is $8 trillion, government spending is $2 trillion, and taxes are $0.5 trillion. How much is savings

Answer 1

Answer:

The amount of savings is $3.5 trillion.

Explanation:

This can be calculated using the following saving is equal to invstment (S = I) formula for a closed economy:

Savings = Y - T - C  ........................ (1)

Where;

Y = GDP = $12 trillion

C = consumption = $8 trillion

T = taxes = $0.5 trillion

Substituting thee values into equation (1), we have:

Savings = $12 trillion - $8 trillion - $0.5 trillion

Savings = $3.5 trillion

Therefore, the amount of savings is $3.5 trillion.