Using the aggregate expenditure model, the equilibrium level of the aggregate expenditure can occur when the economy is producing
A) only at full employment.
B) only at above full employment.
C) only at below full employment.
D) at full employment, above full employment, or below full employment.
E) at either below full employment or at full employment but never at above full employment.

Question

Quizplus · Accepted Answer

According to the aggregate expenditure model, the equilibrium level of aggregate expenditure can occur at any level of output – below full employment, at full employment, or above full employment. This is determined by the level at which aggregate expenditure (aggregate demand) equals the aggregate supply of output (real GDP). Therefore, the economy can be at equilibrium at any level of output, including at or above full employment.

Using the Aggregate Expenditure Model, the Equilibrium Level of the Aggregate