Exhibit 9-2 Keynesian aggregate-expenditures model

As shown in Exhibit 9-2, equilibrium GDP is:
A) $1 trillion.
B) $3 trillion.
C) $5 trillion.
D) $6 trillion.

Question

Exhibit 9-2 Keynesian aggregate-expenditures model

As shown in Exhibit 9-2, equilibrium GDP is:
A) $1 trillion. 
B) $3 trillion. 
C) $5 trillion. 
D) $6 trillion.

Quizplus · Accepted Answer

In the Keynesian aggregate-expenditures model, equilibrium GDP is where the aggregate expenditures (AE) line intersects the 45-degree line (where GDP = AE). In this exhibit, this occurs at the point where GDP is $5 trillion. Therefore, the correct answer is C.

Exhibit 9-2 Keynesian Aggregate-Expenditures Model