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

Question

Quizplus · Accepted Answer

Equilibrium occurs in the AD-output model when there is no unplanned inventory depletion or accumulation, which means that the amount produced (GDP) equals the amount demanded (AD). If AD is greater than GDP, there will be inventory accumulation, and if AD is less than GDP, there will be inventory depletion. Consumption equaling investment is not necessarily indicative of equilibrium.

In the Aggregate Demand-Output Model, Equilibrium Occurs If