On the 45-degree line diagram, the 45-degree line shows points where real aggregate expenditure equals
A)unplanned investment.
B)planned investment.
C)real GDP.
D)nominal GDP.
E)potential GDP.

Question

Quizplus · Accepted Answer

The 45-degree line represents the points where real GDP is equal to aggregate expenditure. This is because GDP measures the total output of goods and services produced in an economy, while aggregate expenditure measures the total spending on those goods and services. Therefore, at the points where these two measures are equal, we have a balanced economy where all goods produced are being sold and there is no excess supply or demand.

On the 45-Degree Line Diagram, the 45-Degree Line Shows Points