Question

In the small closed economy of san lucretia, the currency is the denar. statistics for last year show that private saving was 60 billion denars, taxes were 70 billion denars, government purchases of goods and services were 80 billion denars, there were no transfer payments by the government, and gdp was 400 billion denars. what were consumption and investment in san lucretia?

Answer 1

Consumption was 270 billion and Investments were 260 billion.

(All calculations shown in billions)

Consumption = GDP - Taxes - Private savings

400 - 70 - 60 = 270 billion

Investments = Consumption + (taxes- goods and services)

270 + (70-80)

270 - 10 = 260 Billion