FIGURE 21-3 Refer to Figure 21-3.What does each point along the 45-degree line represent?
A)combinations of desired aggregate expenditure and actual national income where consumption expenditure equals saving
B)the equilibrium condition that desired aggregate expenditure equals actual national income
C)levels of actual national income where desired AE is equal to the sum of desired consumption and desired investment
D)levels of actual national income that occur when autonomous expenditure is increasing at a constant (linear)rate
E)levels of actual national income where desired saving is equal to zero

Question

FIGURE 21-3 Refer to Figure 21-3.What does each point along the 45-degree line represent?
A)combinations of desired aggregate expenditure and actual national income where consumption expenditure equals saving 
B)the equilibrium condition that desired aggregate expenditure equals actual national income 
C)levels of actual national income where desired AE is equal to the sum of desired consumption and desired investment 
D)levels of actual national income that occur when autonomous expenditure is increasing at a constant (linear)rate 
E)levels of actual national income where desired saving is equal to zero

Quizplus · Accepted Answer

Each point along the 45-degree line represents the equilibrium condition where desired aggregate expenditure (which includes consumption, investment, government spending, and net exports) is equal to actual national income. This is because the 45-degree line shows all points where desired expenditure equals income, and at equilibrium, where there is no unplanned inventory accumulation, actual expenditure equals income.