Figure 12-1
-Refer to Figure 12-1.If the economy is at a level of aggregate expenditure given by point K,
A)the economy is in equilibrium.
B)production is greater than spending.
C)production is less than spending.
D)inventories will increase above their desired level.

Question

Figure 12-1 
-Refer to Figure 12-1.If the economy is at a level of aggregate expenditure given by point K,
A)the economy is in equilibrium. 
B)production is greater than spending. 
C)production is less than spending. 
D)inventories will increase above their desired level.

Quizplus · Accepted Answer

Point K is the point where the aggregate expenditure line intersects the 45-degree line. At this point, aggregate expenditure equals output and the economy is in equilibrium. Therefore, choice A is the correct answer. Choices B, C, and D are incorrect as they all suggest a situation where production and spending do not match, which is not the case at point K.

Figure 12-1 -Refer to Figure 12-1.If the Economy Is at a Level