Use the figure below to answer the following questions.
Figure 11.2.2
The economy depicted does not engage in international trade and has no government.Planned aggregate expenditure AE) is equal to the sum of consumption expenditure C) and investment I).
-Refer to Figure 11.2.2.Investment is
A)$100 billion.
B)$25 billion.
C)$75 billion.
D)$50 billion.
E)increasing as real GDP increases.

Question

Use the figure below to answer the following questions.
  Figure 11.2.2
The economy depicted does not engage in international trade and has no government.Planned aggregate expenditure AE) is equal to the sum of consumption expenditure C) and investment I).
-Refer to Figure 11.2.2.Investment is
A)$100 billion. 
B)$25 billion. 
C)$75 billion. 
D)$50 billion. 
E)increasing as real GDP increases.

Quizplus · Accepted Answer

Investment is typically represented as a flat line in the Keynesian cross model because it is assumed to be autonomous, meaning it does not change with the level of real GDP. Therefore, the correct answer is the value at which the investment line is set, which is $25 billion.

Use the Figure Below to Answer the Following Questions