Refer to the data for a private closed economy. If gross investment is $12 billion, the equilibrium level of GDP will be:
1 answer:
Answer: $360 billion
Explanation:
In a private closed economy, there will be two components missing which are Government spending and Net exports.
There will be no Government spending because the economy is private and there will be no net exports because the economy is closed.
GDP will therefore be:
= Consumption + Investment
If Investment is $12 billion then the equilibrium level of GDP will be the GDP which when Consumption is deducted, the investment amount of $12 billion will be the result.
That GDP level is $360 billion.
When the consumption amount of $348 billion is subtracted from the GDP, you get $12 billion for investment.
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