An important point in understanding the aggregate expenditures model is that real GDP:
A) equals consumer expenditures.
B) consists of consumer expenditures plus savings plus jobs plus government spending.
C) can be negative during recessions.
D) equals total income in the economy.

Question

Quizplus · Accepted Answer

Real GDP equals total income in the economy because all expenditures in an economy (on goods and services) eventually become someone's income. This is a fundamental principle in macroeconomics that links the production side of the economy (measured by GDP) with the income side.

An Important Point in Understanding the Aggregate Expenditures Model Is