Suppose That in a Closed Economy GDP Is Equal to 10

question 15

Multiple Choice

Suppose that in a closed economy GDP is equal to 10 000,taxes are equal to 2500,consumption is equal to 6500,and government expenditures are equal to 2000.What is private saving?

• A)1500
• B)1000
• C)500
• D)0

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Definitions:

Surplus

A situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Substitution Effect

The economic concept that as prices rise (or incomes decrease), consumers will replace more expensive items with cheaper alternatives, holding utility constant.

Relative Price

Relative price is the price of one good or service compared to another, essentially indicating the trade-off between choosing one over the other.

Price Increases

Price Increases involve a rise in the cost of goods or services over time, often measured by inflation rates.