In the aggregate expenditures model, equilibrium occurs if:
A) aggregate expenditures (AE) are greater than GDP.
B) aggregate expenditures (AE) are less than GDP.
C) there is no unplanned inventory depletion or accumulation.
D) consumption equals investment.

Question

Quizplus · Accepted Answer

In the aggregate expenditures model, equilibrium occurs at the point where planned aggregate expenditures equal GDP. This means there is no unplanned inventory depletion or accumulation, so C is the correct choice. A and B are incorrect because they only occur when there is a disequilibrium in the market. D is incorrect because consumption does not always equal investment, and it is not the sole determinant of equilibrium.

In the Aggregate Expenditures Model, Equilibrium Occurs If