The following information is for a closed economy:

-Refer to the above information.If both government spending and taxes are zero,the equilibrium level of GDP:
A) is $200.
B) is $300.
C) is $400.
D) is $500.

Question

The following information is for a closed economy:
 
-Refer to the above information.If both government spending and taxes are zero,the equilibrium level of GDP:
A) is $200. 
B) is $300. 
C) is $400. 
D) is $500.

Quizplus · Accepted Answer

According to the information given, the equilibrium level of GDP is where the aggregate expenditure line intersects the 45-degree line, which is at the point where GDP equals $300. Since both government spending and taxes are zero, there are no changes in aggregate expenditure and the equilibrium level of GDP remains at $300.

The Following Information Is for a Closed Economy