All figures in the table below are in billions of dollars. Refer to the above data. If this economy were an open economy, the equilibrium GDP will be:
A) $650 billion
B) $600 billion
C) $550 billion
D) $500 billion

Question

All figures in the table below are in billions of dollars.  Refer to the above data. If this economy were an open economy, the equilibrium GDP will be:
A) $650 billion 
B) $600 billion 
C) $550 billion 
D) $500 billion

Quizplus · Accepted Answer

In an open economy, injections (exports and investment) increase the GDP and leakages (imports and saving) decrease the GDP. To find the equilibrium GDP, we subtract leakages from injections.

In this case, injections are exports ($150 billion) and investment ($100 billion), which total to $250 billion.

Leakages are imports ($100 billion) and savings ($100 billion), which also total to $250 billion.

Therefore, equilibrium GDP = Injections - Leakages = $250 billion - $250 billion = $0 billion + $550 billion (initial GDP) = $550 billion.

All Figures in the Table Below Are in Billions of Dollars