Consider a simple macro model with demand-determined output.At the equilibrium level of national income,
A)consumers' purchases of goods and services equal firms' purchases of investment goods.
B)firms will hold no inventories of raw materials or final goods.
C)desired aggregate expenditures will equal total output.
D)desired aggregate expenditures will equal total output minus inventory holdings.
E)consumers' purchases of goods and services equal their saving.

Question

Quizplus · Accepted Answer

At equilibrium, desired aggregate expenditures, which represent consumer spending, investment, and government spending, will equal total output, which represents the total amount of goods and services produced in the economy. This is because any goods produced are ultimately purchased by someone, whether it be consumers, firms, or the government, resulting in a balance between supply and demand.

Consider a Simple Macro Model with Demand-Determined Output