In the income-expenditure model, for each price level there is a different equilibrium output level. These various price level and equilibrium output combinations are used to derive

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The combination of price level and equilibrium output levels derived from the income-expenditure model can be used to plot points on the aggregate demand curve. A downward sloping aggregate demand curve shows the relationship between the general price level and the total quantity of goods and services demanded by all consumers and firms in the economy. Each point on the AD curve represents a different combination of price level and equilibrium output level.

In the Income-Expenditure Model, for Each Price Level There Is