The following information is for a private closed economy,where I g is gross investment,S is saving,and Y is gross domestic product (GDP).
I g = 80
S = -80 + .4Y
-Refer to the above information.In equilibrium,consumption will be:
A) $400
B) $280
C) $320
D) $360

Question

Quizplus · Accepted Answer

In a closed economy, saving must equal investment for equilibrium to occur, so: S = I_g -80 + .4Y = 80 .4Y = 160 Y = 400 Now that we know Y (GDP), we can use the consumption function to find consumption: C = Y - S C = 400 - (-80 + .4(400)) C = 400 - (-80 + 160) C = 320 Therefore, the answer is choice C.

The Following Information Is for a Private Closed Economy,where Ig

The Following Information Is for a Private Closed Economy,where I_g