Refer to the diagram for a private closed economy. At the $400 level of GDP,
A) aggregate expenditures exceed GDP, with the result that GDP will rise.
B) consumption is $350 and planned investment is zero, so aggregate expenditures are $350.
C) consumption is $300 and planned investment is $50, so aggregate expenditures are $350.
D) consumption is $300 and actual investment is $100, so aggregate expenditures are $400.

Question

Refer to the diagram for a private closed economy. At the $400 level of GDP,
A) aggregate expenditures exceed GDP, with the result that GDP will rise. 
B) consumption is $350 and planned investment is zero, so aggregate expenditures are $350. 
C) consumption is $300 and planned investment is $50, so aggregate expenditures are $350. 
D) consumption is $300 and actual investment is $100, so aggregate expenditures are $400.

Quizplus · Accepted Answer

At the $400 level of GDP, the aggregate expenditures line intersects with the 45-degree line at the point where aggregate expenditures are $350. This means that at this level of GDP, consumption is $300 and planned investment is $50, making total aggregate expenditures $350.

Refer to the Diagram for a Private Closed Economy