In the aggregate expenditures model, an economy's equilibrium occurs where the:
A) aggregate expenditures equal real GDP.
B) 45-degree line intersects with the aggregate savings curve.
C) total spending equals total saving.
D) total investment equals total saving plus total government purchases.

Question

Quizplus · Accepted Answer

Equilibrium in the aggregate expenditures model occurs where aggregate expenditures equal real GDP, meaning the total spending by all sectors (households, businesses, government, and foreign) matches the total value of goods and services produced within the economy.

In the Aggregate Expenditures Model, an Economy's Equilibrium Occurs Where