(Advanced analysis)Answer the question on the basis of the following information for a private closed economy,where I_g is gross investment,S is saving,and Y is gross domestic product (GDP). $\begin{array} { l } I _ { g } = \overline { I _ { g } } = 80 \ \mathrm {~S} = - 80 + 0.4 \mathrm { Y } \end{array}$ Refer to the information.In equilibrium,consumption will be: A) $400. B) $280. C) $320. D) $360.

Question

Quizplus · Accepted Answer

In a closed economy, savings equal investment (S=IS). Therefore, we can rewrite the equation as Y=C+S. Also, IS=YG-YG1, where YG is the level of real GDP required to maintain full employment, and YG1 is actual GDP. Therefore, S=YG-YG1. In equilibrium, Y=C+S+I_g. Combining these equations, we get Y=C+YG-YG1+I_g, rearranging this we get C=Y-YG+YG1-I_g. Plugging in the given values, we get C=700-500+100-80= $320. Therefore, the answer is C, $320.

(Advanced Analysis)Answer the Question on the Basis of the Following Ig=Ig‾=80 S=−80+0.4Y\begin{array} { l } I _ { g } = \overline { I _ { g } } = 80 \\\mathrm {~S} = - 80 + 0.4 \mathrm { Y }\end{array}Ig​=Ig​​=80 S=−80+0.4Y​

(Advanced Analysis)Answer the Question on the Basis of the Following $\begin{array} { l } I _ { g } = \overline { I _ { g } } = 80 \\\mathrm {~S} = - 80 + 0.4 \mathrm { Y }\end{array}$