Answer the question below on the basis of the following information for a private closed economy: $$\begin{array}{l}
\begin{array} { c c }
\underline{\text { Gross Domestic Product }} &\underline{ \text { Consumption }} \
\$100& \$ 120 \
200 & 180 \
300 & 240 \
400 & 300 \
500 & 360
\end{array}\
\begin{array} { c c }
\underline{\text { Expected Rate of Return }} &\underline{ \text { Amount of Investment }} \
25 \% & \$ 0 \
20 & 20 \
15 & 40 \
10 & 60 \
5 & 80
\end{array}
\end{array}$$ Refer to the information.If the real interest rate is 20 percent,the equilibrium GDP will be:
A) $100.
B) $200.
C) $300.
D) $400.

Question

Answer the question below on the basis of the following information for a private closed economy: $$\begin{array}{l}
\begin{array} { c c } 
\underline{\text { Gross Domestic Product }} &\underline{ \text { Consumption }} \
\$100& \$ 120 \
200 & 180 \
300 & 240 \
400 & 300 \
500 & 360
\end{array}\
\begin{array} { c c } 
\underline{\text { Expected Rate of Return }} &\underline{ \text { Amount of Investment }} \
 25 \% & \$ 0 \
20 & 20 \
15 & 40 \
10 & 60 \
5 & 80
\end{array}
\end{array}$$ Refer to the information.If the real interest rate is 20 percent,the equilibrium GDP will be:
A) $100.
B) $200.
C) $300.
D) $400.

Quizplus · Accepted Answer

At a 20% real interest rate, the amount of investment is $20. At GDP of $200, consumption is $180, so total spending (consumption + investment) is $200, which matches the GDP, indicating equilibrium.

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