In the aggregate expenditure model, the points on the 45-degree line represent all points where:
A) aggregate expenditure equals aggregate saving.
B) real GDP equals the money supply.
C) real GDP equals aggregate expenditure.
D) aggregate saving equals aggregate GDP.

Question

Quizplus · Accepted Answer

The 45-degree line in the aggregate expenditure model represents all points where real GDP (Gross Domestic Product) equals aggregate expenditure. This is because, at any point on this line, the value of the goods and services produced (GDP) is exactly equal to the total spending on those goods and services (aggregate expenditure).

In the Aggregate Expenditure Model, the Points on the 45-Degree