FIGURE 21-3
-Refer to Figure 21-3. If national income is Y1 and the aggregate expenditure function is AE1, then desired aggregate expenditure
A) exceeds income and income will rise.
B) exceeds income and income will fall.
C) is less than income and income will rise.
D) is equal to income and income will not change.
E) is less than income and income will fall.

Question

FIGURE 21-3
-Refer to Figure 21-3. If national income is Y1 and the aggregate expenditure function is AE1, then desired aggregate expenditure
A) exceeds income and income will rise. 
B) exceeds income and income will fall. 
C) is less than income and income will rise. 
D) is equal to income and income will not change. 
E) is less than income and income will fall.

Quizplus · Accepted Answer

The intersection of the AE1 curve and the 45-degree line occurs to the right of the Y1 level of income, indicating that desired aggregate expenditure exceeds income. In order to reach equilibrium, income will have to increase.

FIGURE 21-3 -Refer to Figure 21-3. If National Income Is Y1 and Y1