FIGURE 21-3 -Refer to Figure 21-3.If national income is Y₁ and the aggregate expenditure function is AE₁,then desired aggregate expenditure A)exceeds income and income will rise. B)exceeds income and income will fall. C)is less than income and income will rise. D)is equal to income and income will not change. E)is less than income and income will fall.

Question

Quizplus · Accepted Answer

The desired aggregate expenditure exceeds income, indicating a situation of a spending gap or a leakage in the economy. To close the gap and achieve macroeconomic equilibrium, income will have to rise. The increase in income will lead to an increase in consumption, which will raise aggregate expenditure, eventually bringing it in line with income.

FIGURE 21-3 -Refer to Figure 21-3.If National Income Is Y1 and the and the Aggregate

FIGURE 21-3 -Refer to Figure 21-3.If National Income Is Y₁ and the and the Aggregate