Exhibit 17-1 In Exhibit 17-1, the equilibrium level of output determined by private decisions is
A)0 units
B)100 units
C)between 100 and 160 units
D)160 units
E)the answer cannot be determined from the information given

Question

Exhibit 17-1  In Exhibit 17-1, the equilibrium level of output determined by private decisions is
A)0 units 
B)100 units 
C)between 100 and 160 units 
D)160 units 
E)the answer cannot be determined from the information given

Quizplus · Accepted Answer

The equilibrium level of output determined by private decisions occurs where the aggregate expenditure line (AE) intersects the 45-degree line (Y = E). In Exhibit 17-1, this intersection occurs at a level of output of 160 units, which is represented by point E1. At this level of output, planned aggregate expenditure (PAE) equals output (Y), indicating that the economy is in equilibrium. Therefore, the correct answer is D, 160 units.

Exhibit 17-1 in Exhibit 17-1, the Equilibrium Level of Output