FIGURE 21-3 -Refer to Figure 21-3.Assuming AE₀ is the prevailing aggregate expenditure function,the distance 0A is a measure of A)aggregate expenditure at equilibrium national income. B)autonomous desired expenditures. C)induced expenditures. D)desired saving. E)desired investment.

Question

Quizplus · Accepted Answer

According to the Keynesian cross model, the point where the aggregate expenditure function intersects the 45-degree line represents the equilibrium level of national income. Therefore, 0A represents the level of autonomous desired expenditures at equilibrium national income. Autonomous desired expenditures are the level of expenditures that are independent of changes in national income, such as government spending, investment, and exports. Therefore, the best choice is B, which identifies 0A as a measure of autonomous desired expenditures.

FIGURE 21-3 -Refer to Figure 21-3.Assuming AE0 Is the Prevailing Aggregate Expenditure

FIGURE 21-3 -Refer to Figure 21-3.Assuming AE₀ Is the Prevailing Aggregate Expenditure