-In the above table, there are no taxes and no imports or exports. Suppose that investment increases from $500 to $750 at each level of real GDP. After the increase, what is the level of planned expenditure when real GDP equals $5,000?
A) $5,000
B) $5,250
C) $1,000
D) $250

Question

-In the above table, there are no taxes and no imports or exports. Suppose that investment increases from $500 to $750 at each level of real GDP. After the increase, what is the level of planned expenditure when real GDP equals $5,000?
A) $5,000 
B) $5,250 
C) $1,000 
D) $250

Quizplus · Accepted Answer

The increase in investment from $500 to $750 at each level of real GDP means that at a real GDP of $5,000, the planned expenditure would increase by the same amount of the increase in investment. Since the original planned expenditure must have been equal to the real GDP (because there are no taxes, imports, or exports, implying a closed economy with no government spending), it was $5,000. Adding the $250 increase in investment to the original planned expenditure of $5,000 results in a new planned expenditure of $5,250.

-In the Above Table, There Are No Taxes and No