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15 March, 17:52

In a small, closed economy, national income (GDP) is $ 500.00 million for the current month. Individuals have spent $ 300.00 million on the consumption of goods and services. They have paid a total of $ 200.00 million in taxes, and the government has spent $ 150.00 million on goods and services this month. Use this information and the national income identity to answer the questions. How much is spent on investment in this economy?

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  1. 15 March, 18:14
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    The total investment in the economy is $50 million

    Explanation:

    The following equation is used to calculate the GDP: GDP = C + I + G + (X - M) or GDP = private consumption + gross investment + government investment + government spending + (exports - imports)

    Using this formula we can determine the amount of investment.

    Investment = 500 (GDP) - 300 (private consumption) - 150 (government spending) = $50.
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