At equilibrium expenditure
A) firms hold no inventories of raw materials or final goods.
B) aggregate planned expenditure equals real GDP.
C) aggregate planned expenditure equals real GDP minus net exports.
D) consumersʹ expenditures on goods and services equal firmsʹ purchases of investment goods.

Question

Quizplus · Accepted Answer

At equilibrium expenditure, aggregate planned expenditure (the sum of consumption, investment, government spending, and net exports) equals real GDP. This is because firms will only produce the amount of goods and services that are demanded at that level of expenditure, meaning that all output will be sold and there will be no unplanned accumulation of inventories.

At Equilibrium Expenditure