Suppose That There Is No Trade and No Government in a Small

question 57

Multiple Choice

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. There is a new government and it imposes taxes on its citizens to spend on infrastructure. Taxes and government spending are both $2 trillion. What is the level of investment spending now?

• A) $7 trillion
• B) $5 trillion
• C) $18 trillion
• D) -$4 trillion

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Definitions:

Insurer's Promise

The commitment by an insurance company to pay for losses or damages specified in an insurance policy.

Insurance Contract

A legally binding agreement between an insurer and the insured, outlining the terms for the insurer to compensate the insured for specific losses or damages.

Breach of Contract

Occurs when one party in a binding agreement fails to fulfill their obligations without a legitimate legal excuse.

Obligations

Duties or responsibilities enforced by law, contract, or a sense of duty that compel someone to act or refrain from acting in a certain manner.