Refer to the diagram for a private closed economy. The equilibrium GDP is
A) $60 billion.
B) $180 billion.
C) between $60 and $180 billion.
D) $60 billion at all levels of GDP.

Question

Refer to the diagram for a private closed economy. The equilibrium GDP is
A) $60 billion. 
B) $180 billion. 
C) between $60 and $180 billion. 
D) $60 billion at all levels of GDP.

Quizplus · Accepted Answer

At the intersection of the aggregate expenditure line (AE) and the 45-degree line (Y = E), the equilibrium GDP is $180 billion. This is because at this level of output, planned spending equals actual output, and there is no incentive for producers to increase or decrease production. Thus, B is the best choice.

Refer to the Diagram for a Private Closed Economy