Equilibrium expenditure occurs where the aggregate expenditure curve crosses the
A) vertical axis.
B) consumption function.
C) 45- degree line.
D) horizontal axis.

Question

Quizplus · Accepted Answer

Equilibrium expenditure occurs where the aggregate expenditure curve intersects the 45-degree line, which represents the equality between aggregate expenditure and output (or income) level, where there is no unplanned inventory accumulation or depletion. The vertical axis (A) and horizontal axis (D) are not related to equilibrium expenditure. The consumption function (B) may be a component of aggregate expenditure, but it does not determine the equilibrium level of output by itself.

Equilibrium Expenditure Occurs Where the Aggregate Expenditure Curve Crosses the