Suppose that in a closed economy, GDP is $15 trillion, Consumption is $6 trillion, Government Purchases are $5 trillion, and there is a $500 billion budget deficit. 6. What are taxes? 7. What is public saving? 8. What is private saving?

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Suppose that in a closed economy, GDP is $15 trillion, Consumption is $6 trillion,
Government Purchases are $5 trillion, and there is a $500 billion budget deficit.
6. What are taxes?
7. What is public saving?
8. What is private saving?
9. What is national saving?
10. What is investment?
If then taxes are raised by $500 billion dollars, and the public pays for those taxes
entirely by reducing their consumption (no change to their savings), after this tax
increase,
11. What is consumption?
12. What are taxes?
13. What is public saving?
14. What is private saving?
15. What is national saving?
16. What is investment?
Transcribed Image Text:Suppose that in a closed economy, GDP is $15 trillion, Consumption is $6 trillion, Government Purchases are $5 trillion, and there is a $500 billion budget deficit. 6. What are taxes? 7. What is public saving? 8. What is private saving? 9. What is national saving? 10. What is investment? If then taxes are raised by $500 billion dollars, and the public pays for those taxes entirely by reducing their consumption (no change to their savings), after this tax increase, 11. What is consumption? 12. What are taxes? 13. What is public saving? 14. What is private saving? 15. What is national saving? 16. What is investment?
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 given that,

GDP is $15 trillion,

Consumption is $6 trillion,

Government purchases are $5 trillion,

budget deficit are $500 billion = $0.5 trillion.

 

 

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