Refer to the above diagram for a private closed economy.The equilibrium level of GDP is:
A)$400
B)$300
C)$250
D)$375

Question

Refer to the above diagram for a private closed economy.The equilibrium level of GDP is:
A)$400 
B)$300 
C)$250 
D)$375

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 of $375 in this diagram. At this level of GDP, total output is equal to total expenditures, and there is no pressure for firms to change production levels. Therefore, D is the correct answer.

Refer to the Above Diagram for a Private Closed Economy