In an income-expenditure equilibrium:

Question

Quizplus · Accepted Answer

In an income-expenditure equilibrium, all planned expenditures (including consumption, investment, and government spending) equals total income. Therefore, there is no unplanned inventory investment, as firms have already sold all of their output at the planned level of expenditure. If there were unplanned inventory investment, it would mean that firms produced more than was demanded by consumers, indicating an imbalance between income and expenditure.

In an Income-Expenditure Equilibrium