(Advanced Analysis) in a Private Closed Economy, (A) the Marginal

question 85

Multiple Choice

(Advanced analysis) In a private closed economy, (a) the marginal propensity to save is 0.25, (b) consumption equals income at $120 billion, and (c) the level of investment is $40 billion. What is the
Equilibrium level of income?

• A) $280 billion
• B) $320 billion
• C) $262 billion
• D) $198 billion

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Definitions:

Opportunity Cost

The expenditure experienced from not picking the immediate runner-up selection during a choice process.

Economies of Scale

The cost advantage achieved when production becomes efficient, leading to a decrease in the per-unit cost as the volume of production increases.

Autarky

A situation where a country or economy operates in total self-sufficiency, without engaging in international trade.

Production Possibilities

The different quantities of various goods and services that an economy can produce with given resources and technology.