Consider the following data for a closed economy: y = $12 trillion c = $8 trillion g = $2 trillion spublic = $negative 0.50 trillion t = $2 trillion now suppose that government purchases increase from $2 trillion to $2.60 trillion but the values of y and c are unchanged. what must happen to the values of s and i? a. s and i increase by $0.60 trillion. b. s and i drop by $0.60 trillion. c. s increases by $0.60 trillion and i drops by $0.60 trillion. d. s drops by $0.60 trillion and i increases by $0.60 trillion.

B. S and I drop by $0.60 trillion.

Explanation:

We know that

Y = C + I + G

$12 trillion = $8 trillion + I + $2 trillion

$12 trillion = $10 trillion + I

So, I = $12 trillion - $10 trillion

       = $2 trillion

As the government purchases increase from $2 trillion to $2.60 trillion

and the rest of the things remain the same.  

So New I = $12 trillion - $8 trillion - $2.60 trillion

               =  $1.4 trillion

So, the difference would be equals to

= $2 trillion - $1.4 trillion

= $0.6 trillion

The $0.6 trillion reflect fall in the investment  

And the saving and the investment are equal to each other

Hence, the B option is the right answer