GDP C S Ig $100 $100 $0 $80
200 160 40 80
300 220 80 80
400 280 120 80
500 340 160 80
600 400 200 80
700 460 240 80
Refer to the accompanying information for a closed economy.If government spends $80 billion at each level of GDP, and imposes a lump-sum tax of $100

Question

Quizplus · Accepted Answer

The correct answer is A because the equilibrium GDP is the level of GDP where aggregate expenditure (AE) equals GDP. In this case, AE = C + S + Ig + G = 100 + 0 + 80 + 80 = $260 billion. Therefore, the equilibrium GDP is $260 billion.