In a closed economy without a government sector,the equilibrium level of income is found where income is equal to
A)planned consumption expenditures divided by planned business investment
B)the ratio of planned business investment to planned consumption expenditures
C)planned consumption expenditures plus planned business investment plus planned net exports
D)planned consumption expenditures plus planned business investment.

Question

Quizplus · Accepted Answer

In a closed economy where there is no government sector, there are no net exports, so we do not consider them. The equilibrium level of income is found where the total planned spending equals total income. Total planned spending consists of planned consumption expenditures and planned business investment only. Therefore, the equilibrium level of income is found where planned consumption expenditures plus planned business investment equals total income. Hence, the correct choice is D.

In a Closed Economy Without a Government Sector,the Equilibrium Level