In the aggregate expenditures model, the equilibrium GDP is
A)assumed to be equal to the potential GDP level.
B)not necessarily equal to the full-employment GDP.
C)always above the potential GDP level.
D)always less than the full-employment GDP level.

Question

Quizplus · Accepted Answer

The equilibrium GDP in the aggregate expenditures model is not necessarily equal to the full-employment GDP. This is because the aggregate expenditures model takes into account the effects of changes in aggregate demand, which can lead to the equilibrium GDP being above or below the full-employment GDP.

In the Aggregate Expenditures Model, the Equilibrium GDP Is