Ignoring the government and foreign sectors, equilibrium real Gross Domestic Product (GDP) is determined by
A) the intersection of the planned saving and planned investment schedules.
B) the intersection of the planned saving and planned consumption schedules.
C) the intersection of the consumption function with the 45-degree line.
D) finding the real Gross Domestic Product (GDP) for which real savings are zero.

Question

Quizplus · Accepted Answer

Equilibrium real GDP is determined by the intersection of the planned saving and planned investment schedules, as they represent the total spending in the economy. Planned saving is the amount of income that households and firms plan to save and not spend, while planned investment is the amount that firms plan to invest in new capital goods. The intersection of these two schedules represents the level of output where total spending equals total income, which results in equilibrium GDP.

Ignoring the Government and Foreign Sectors, Equilibrium Real Gross Domestic