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Use the following information of a hypothetical economy to answer this question: National Income (Y) = 5,200; Government Budget Deficit = 150; Disposable Income (Yd) = 4,400; and Consumption (C) = 4,100. The value of Investment (I) is Group of answer choices 150 260 270 280 none of the above

Question

Use the following information of a hypothetical economy to answer this question: National Income (Y) = 5,200; Government Budget Deficit = 150; Disposable Income (Yd) = 4,400; and Consumption (C) = 4,100. The value of Investment (I) is Group of answer choices

150

260

270

280

none of the above

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Solution

To find the value of Investment (I), we need to use the formula for National Income (Y), which is Y = C + I + G (where G is government spending). However, we don't have the value for G.

But we know that Disposable Income (Yd) = Y - T (where T is taxes). And we also know that Yd = C + S (where S is savings). So, we can say that Y - T = C + S.

Given that the Government Budget Deficit is 150, this means that the government is spending more than it's earning in taxes, so we can say that T = G - 150.

Substituting T in the equation Y - T = C + S, we get Y - (G - 150) = C + S, which simplifies to Y - G + 150 = C + S.

We can rearrange this to find S (savings), which is S = Y - G + 150 - C.

Substituting the given values, we get S = 5200 - G + 150 - 4100.

This simplifies to S = 1250 - G.

Now, in a closed economy, Investment (I) is equal to Savings (S), so I = S.

Therefore, I = 1250 - G.

Without the value of G (government spending), we can't find the exact value of I (Investment). So, the correct answer is "none of the above".

This problem has been solved

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