When the economy is in equilibrium,

Question

Quizplus · Accepted Answer

When the economy is in equilibrium, total expenditures (i.e., total spending by households, firms, and the government) will be equal to total production (i.e., total output of goods and services by firms). This means that there is no excess demand or supply, and thus no changes in inventory levels. Therefore, option A and B are incorrect. Option D is also incorrect as it suggests that there is excess demand, which is not possible in equilibrium.

When the Economy Is in Equilibrium