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Answer :
Final answer:
The given figures for Consumption, Investment, and Government spending total to $18 trillion, which is $1 trillion more than the stated GDP of $17 trillion. This means there's a net capital outflow of $1 trillion, making (d) the right answer.
Explanation:
The figures given in the question allow us to calculate the variables in the formula for Gross Domestic Product (GDP). GDP is the sum of Consumption (C), Investment (I), Government spending (G), and the net of Exports and Imports (X-M).
In this case: GDP = C+I+G+(X-M), we have values for C ($10 trillion), I ($5 trillion) and G ($3 trillion), which sum up to $18 trillion. Since the total GDP is $17 trillion (trillion less than C+I+G), it means the balance of Exports and Imports (X-M) resulted in a net capital outflow i.e., more money went out of the country than came in. Thus, the correct answer is: d) a net capital outflow of $1 trillion.
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Final answer:
The question refers to the calculation of current account balance in an open economy. Given the expenditure components in the question, it seems there is an error as the total outstrips the stated GDP indicating a trade deficit instead of surplus.
Explanation:
In an open economy like the one described in the question, the total Gross Domestic Product(GDP) value can be computed in two different ways: the expenditure approach and the income approach. According to the expenditure approach, GDP = Consumption(C) + Investment(I) + Government Spending(G) + (Exports(X) - Imports(M)).
In this specific case, Strangely, the given information doesn't perfectly align with any of the choices you've presented. The government spending ($3 trillion), plus consumption ($10 trillion), and investments ($5 trillion) exceeds the GDP of $17 trillion, suggesting that there is trade deficit not surplus. Similarly, not enough information is provided to definitively determine the net capital inflow or outflow. Therefore, based on the given information, a definitive answer cannot be provided.
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