Which of the following statements is true about equilibrium in the aggregate expenditures model?
I. Equilibrium is found at the level of real GDP at which the aggregate expenditures curve crosses the 45-degree line.
II. In equilibrium, real GDP produced equals aggregate expenditures.
III. In equilibrium, inventories equal zero.
IV. In equilibrium, real GDP produced equals potential real GDP.
A) I only
B) I and II only
C) I, II, and III only
D) I, II, III, and IV

Question

Which of the following statements is true about equilibrium in the aggregate expenditures model? 
I. Equilibrium is found at the level of real GDP at which the aggregate expenditures curve crosses the 45-degree line.
II. In equilibrium, real GDP produced equals aggregate expenditures.
III. In equilibrium, inventories equal zero.
IV. In equilibrium, real GDP produced equals potential real GDP.
A) I only
B) I and II only
C) I, II, and III only
D) I, II, III, and IV

Quizplus · Accepted Answer

I. Equilibrium is found at the intersection of the aggregate expenditures curve and the 45-degree line, where planned aggregate expenditures equal real GDP. This is correct.
II. In equilibrium, real GDP produced equals aggregate expenditures. This is correct.
III. In equilibrium, inventories equal zero. This is not necessarily true, as inventories may be increasing or decreasing in response to changes in aggregate expenditures and real GDP.
IV. In equilibrium, real GDP produced equals potential real GDP. This is not necessarily true either, as the economy may not be operating at potential output in equilibrium.

Which of the Following Statements Is True About Equilibrium in the Aggregate