Equilibrium GDP is reached when
A) aggregate expenditure exceeds GDP
B) aggregate expenditure is less than GDP
C) aggregate expenditure equals the level of output
D) the level of output is greater than aggregate expenditure
E) the level of output is less than aggregate expenditure

Question

Quizplus · Accepted Answer

Equilibrium GDP is the level of output where aggregate expenditure equals the level of output. This means that demand (aggregate expenditure) is equal to supply (output) in the economy, resulting in no unintended inventories or shortages. Therefore, choice C is the correct answer. Choices A, B, D, and E all describe situations where there is a disequilibrium in the economy, which would lead to adjustments such as changes in prices, output, or expenditures.

Equilibrium GDP Is Reached When