Consider the Keynesian cross shown here. The level of equilibrium GDP is:
A)$41 billion.
B)$33 billion.
C)$37 billion.
D)$43 billion.

Question

Consider the Keynesian cross shown here. The level of equilibrium GDP is: 
A)$41 billion. 
B)$33 billion. 
C)$37 billion. 
D)$43 billion.

Quizplus · Accepted Answer

The equilibrium level of GDP is where the planned aggregate expenditure (PAE) equals the actual GDP. At the point where the PAE curve (in this case, the C+I+G curve) intersects with the 45-degree line, we can determine the equilibrium GDP. In this graph, the intersection occurs at $37 billion, so that is the level of equilibrium GDP.

Consider the Keynesian Cross Shown Here