The aggregate output demanded for a given price level occurs at the point where _____
A) an economy reaches the full employment of labor.
B) aggregate expenditure equals real gross domestic product (GDP).
C) actual aggregate expenditure exceeds real gross domestic product (GDP).
D) inventories of goods and services start increasing.
E) inventories of goods and services start decreasing.

Question

Quizplus · Accepted Answer

Aggregate output demanded occurs at the point where aggregate expenditure, which includes consumption, investment, government expenditures, and net exports, equals real GDP. This is known as the equilibrium output level, where there is no unintended accumulation or depletion of inventories. Option A is incorrect because full employment is a separate concept from aggregate output demanded. Option C is incorrect because actual aggregate expenditure exceeding real GDP would lead to an unsustainable situation of rising prices or inflation. Options D and E are incorrect because they describe the impact of aggregate output demanded on inventories, rather than the relationship between aggregate expenditure and real GDP.

The Aggregate Output Demanded for a Given Price Level Occurs