To construct a graph that would enable us to find equilibrium GDP,we would need to plot
A) the consumption-income line
B) a line showing the sum of consumption and investment at each income level
C) the investment spending line
D) the consumption-income line and the government expenditures line
E) an aggregate expenditure line and the 45-degree line from the origin

Question

Quizplus · Accepted Answer

To find equilibrium GDP, we need to plot the aggregate expenditure line (which includes consumption, investment, government spending, and net exports) and the 45-degree line from the origin (which represents all possible points where Y = AE). The intersection of these two lines represents the equilibrium level of GDP, where aggregate expenditure equals output. Therefore, choice E is the best answer.

To Construct a Graph That Would Enable Us to Find