The country of Cedarland does not trade with any other country.Its GDP is $17 billion.Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes.Private saving in Cedarland is $5 billion.For Cedarland,
A)investment is $6 billion and consumption is $7 billion.
B)investment is $6 billion and consumption is $6 billion.
C)investment is $7 billion and consumption is $7 billion.
D)investment is $7 billion and consumption is $6 billion.

Question

Quizplus · Accepted Answer

The GDP of Cedarland is $17 billion. Government purchases are $5 billion, and private saving is $5 billion. Taxes are $6 billion, so disposable income is $11 billion ($17 billion - $6 billion). Private saving is $5 billion, so consumption is $6 billion ($11 billion - $5 billion). Investment is GDP minus consumption and government purchases, which is $6 billion ($17 billion - $6 billion - $5 billion).

The Country of Cedarland Does Not Trade with Any Other