When does the equilibrium quantity of aggregate output occur?
A) when the economy reaches the full employment of labour
B) when planned aggregate expenditure equals income generated from production
C) when actual aggregate expenditures equal real GDP
D) when inventories of goods and services are increasing

Question

When does the equilibrium quantity of aggregate output occur?  
A) when the economy reaches the full employment of labour 
B) when planned aggregate expenditure equals income generated from production 
C) when actual aggregate expenditures equal real GDP 
D) when inventories of goods and services are increasing

Quizplus · Accepted Answer

Equilibrium quantity of aggregate output occurs when planned aggregate expenditure equals income generated from production, which means that the demand for goods and services is equal to the supply of goods and services produced. This is the point where there is no excess demand or excess supply in the economy. This happens regardless of whether the economy is at full employment or not, as it refers to a macroeconomic balance between supply and demand. Option A is incorrect as full employment is not a requirement for achieving equilibrium. Option C is similar to the correct option, but the distinction is that it refers to actual expenditures rather than planned expenditures. Option D is also incorrect as increasing inventories could mean that production is exceeding demand (excess supply) and therefore not at equilibrium.

When Does the Equilibrium Quantity of Aggregate Output Occur