Where can equilibrium GDP be found on a graph?
A) Where the consumption function crosses the 45-degree line
B) Where the 45-degree line crosses the investment function
C) Where the aggregate expenditure function crosses the 45-degree line
D) Where total output is equal to the unplanned inventory change
E) Where the next exports function crosses the 45-degree line

Question

Quizplus · Accepted Answer

Equilibrium GDP can be found where the aggregate expenditure function (AE) crosses the 45-degree line. This is because at equilibrium GDP, total planned spending (AE) is equal to total output.

Where Can Equilibrium GDP Be Found on a Graph