Where I is planned investment, S is saving, and Y is gross domestic product (GDP).
I = I 0 = 80 (6.3)
S = -80 + .4Y (6.4)
-Refer to equations (6.3) and (6.4). The equilibrium GDP in a no-government closed economy will be:
A) $160.
B) $400.
C) $360.
D) $480.

Question

Quizplus · Accepted Answer

In equilibrium, planned investment (I) equals saving (S). Therefore, from the given equations, we set I = S:80 = -80 + .4YSolving for Y, we add 80 to both sides:160 = .4YThen, divide both sides by .4 to solve for Y:Y = 160 / .4 = 400Therefore, the equilibrium GDP (Y) in a no-government closed economy is $400.

Where I Is Planned Investment, S Is Saving, and Y