FIGURE 21-3
-Refer to Figure 21-3. Assuming AE0 is the prevailing aggregate expenditure function, at a level of national income equal to Y3 we can state that
A) consumption is greater than desired aggregate expenditure.
B) consumption is less than desired aggregate expenditure.
C) desired aggregate expenditure is greater than output.
D) desired aggregate expenditure is less than output.
E) desired saving is less than zero.

Question

FIGURE 21-3
-Refer to Figure 21-3. Assuming AE0 is the prevailing aggregate expenditure function, at a level of national income equal to Y3 we can state that
A) consumption is greater than desired aggregate expenditure. 
B) consumption is less than desired aggregate expenditure. 
C) desired aggregate expenditure is greater than output. 
D) desired aggregate expenditure is less than output. 
E) desired saving is less than zero.

Quizplus · Accepted Answer

At a level of national income equal to Y3, if AE0 is the prevailing aggregate expenditure function, desired aggregate expenditure is less than output, indicating that the economy is producing more than is being spent.

FIGURE 21-3 -Refer to Figure 21-3. Assuming AE0 Is the Prevailing Aggregate