Refer to the diagram for a private closed economy. The equilibrium level of GDP is
A) $400.
B) $300.
C) $200.
D) $100.

Question

Refer to the diagram for a private closed economy. The equilibrium level of GDP is
A) $400. 
B) $300. 
C) $200. 
D) $100.

Quizplus · Accepted Answer

The equilibrium level of GDP is where the aggregate expenditures (AE) line intersects with the 45-degree line, which occurs at a GDP level of $300 in this diagram. At this level, the amount produced and spent in the economy is equal to the amount earned, resulting in no unintended changes in inventories.

Refer to the Diagram for a Private Closed Economy