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18 September, 12:14

In an open economy, government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was: a net capital inflow of $10 billion. a net capital outflow of $10 billion. capital inflows of $10 billion and capital outflows of $20 billion. a trade surplus of $20 billion and a financial deficit of $20 billion.

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  1. 18 September, 14:11
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    A net capital inflow of $10 billion.

    Explanation:

    Given that,

    Government spending = $30 billion,

    Consumption = $70 billion,

    Taxes = $20 billion,

    GDP = $100 billion

    Investment spending = $10 billion

    Y = Consumption + Investment spending + Government spending

    = (Consumption - Taxes) + $10 billion + $30 billion

    = ($70 billion - $20 billion) + $10 billion + $30 billion

    = $50 billion + $10 billion + $30 billion

    = $90 billion

    As the amount of GDP is greater than the value of income (Y). Hence, there is a net inflow of capital:

    = GDP - Y

    = $100 billion - $90 billion

    = $10 billion
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