$$\begin{array}{l}
\begin{array} { | c | c | }
\hline \text { Gross Domestic Product } & \text { Consumption } \
\hline \$ 100 & \$ 100 \
\hline 200 & 160 \
\hline 300 & 220 \
\hline 400 & 280 \
\hline 500 & 340 \
\hline 600 & 440 \
\hline
\end{array}\\
\begin{array} { | c | c | }
\hline \text { Expected Rate of Return } & \text { Amount of Investment } \
\hline 15 \% & \$ 0 \
\hline 12 & 40 \
\hline 9 & 80 \
\hline 6 & 120 \
\hline 3 & 160 \
\hline 0 & 200 \
\hline
\end{array}
\end{array}$$ Refer to the tables of information for a private closed economy. If the real interest rate is 9 percent, the equilibrium GDP will be
A) $600.
B) $500.
C) $400.
D) $300.

Question

$$\begin{array}{l}
\begin{array} { | c | c | } 
\hline \text { Gross Domestic Product } & \text { Consumption } \
\hline \$ 100 & \$ 100 \
\hline 200 & 160 \
\hline 300 & 220 \
\hline 400 & 280 \
\hline 500 & 340 \
\hline 600 & 440 \
\hline
\end{array}\\
\begin{array} { | c | c | } 
\hline \text { Expected Rate of Return } & \text { Amount of Investment } \
\hline 15 \% & \$ 0 \
\hline 12 & 40 \
\hline 9 & 80 \
\hline 6 & 120 \
\hline 3 & 160 \
\hline 0 & 200 \
\hline
\end{array}
\end{array}$$ Refer to the tables of information for a private closed economy. If the real interest rate is 9 percent, the equilibrium GDP will be
A) $600.
B) $500.
C) $400.
D) $300.

Quizplus · Accepted Answer

At a real interest rate of 9 percent, the amount of investment is $80 (from the second table). In a private closed economy, equilibrium GDP occurs where planned investment equals savings, which is derived from the difference between GDP and consumption. Looking at the first table, the GDP level where consumption plus the investment of $80 equals GDP is at $300 (Consumption is $220 at this GDP level, so $220 + $80 = $300).

Refer to the Tables of Information for a Private Closed