The following information is for a closed economy: Refer to the above information.If both government spending and taxes are zero, the equilibrium level of GDP:
A)is $200.
B)is $300.
C)is $400.
D)is $500.

Question

The following information is for a closed economy:  Refer to the above information.If both government spending and taxes are zero, the equilibrium level of GDP:
A)is $200. 
B)is $300. 
C)is $400. 
D)is $500.

Quizplus · Accepted Answer

In a closed economy, the equilibrium level of GDP is determined by the formula GDP = C + I + G, where C is consumption, I is investment, and G is government spending. Since both government spending and taxes are zero, the formula simplifies to GDP = C + I. From the given information, we know that consumption is $200, investment is $100, and there are no taxes or government spending. Therefore, the equilibrium level of GDP is $300 (200 + 100).

The Following Information Is for a Closed Economy: Refer