If real Gross Domestic Product (GDP) is at an equilibrium level in a closed economy,
A) real GDP equals the sum of consumption, investment, and government purchases.
B) saving will be less than planned investment.
C) unplanned inventory accumulation will equal planned inventory accumulation.
D) real GDP equals the sum of consumption and investment minus government purchases.

Question

Quizplus · Accepted Answer

When real GDP is at equilibrium in a closed economy, it means that the total spending in the economy (consumption, investment, and government purchases) is equal to the total output of the economy. Therefore, real GDP equals the sum of consumption, investment, and government purchases. Choice B is incorrect because in equilibrium, saving will be equal to planned investment, not less than it. Choice C is incorrect because in equilibrium, there will be no unplanned inventory accumulation. Choice D is incorrect because in equilibrium, government purchases cannot be subtracted from the sum of consumption and investment to obtain real GDP.

If Real Gross Domestic Product (GDP) Is at an Equilibrium