When the economy is at equilibrium:

Question

Quizplus · Accepted Answer

At equilibrium, GDP is equal to the sum of consumption (C), investment (I), government spending (G), and net exports (X - M). This is known as the expenditure approach to measuring GDP. Option A is incorrect because it only includes consumption and investment. Option C is incorrect because it implies that investment is equal to national income, which is not necessarily true. Option D is incorrect because it equates GDP (Y) with the ratio of consumption to investment, which is not a valid measure of equilibrium.

When the Economy Is at Equilibrium