When the economy is operating at the equilibrium level of GDP, we know that
A) total planned real consumption expenditures equal real GDP.
B) planned real investment spending equals real net exports of zero.
C) total planned real expenditures equal real GDP.
D) real net exports equal inventory changes.

Question

Quizplus · Accepted Answer

At equilibrium, total planned real expenditures (which includes consumption, investment, government spending, and net exports) equal real GDP. This means that everything produced in the economy is being bought at the prices offered, resulting in no shortage or surplus of goods and services. Option A is not correct because it only considers consumption, while equilibrium includes all components of GDP. Option B is not correct because net exports can be positive or negative and do not necessarily have to equal zero at equilibrium. Option D is not correct because changes in inventory depend on planned production, which is not necessarily equal to real GDP at equilibrium.

When the Economy Is Operating at the Equilibrium Level of GDP