Consider a simple macro model with demand-determined output.At the equilibrium level of national income,
A)consumers' purchases of goods and services equal firms' purchases of investment goods.
B)firms will hold no inventories of raw materials or final goods.
C)desired aggregate expenditures will equal total output.
D)desired aggregate expenditures will equal total output minus inventory holdings.
E)consumers' purchases of goods and services equals their saving.

Question

Quizplus · Accepted Answer

At the equilibrium level of national income, desired aggregate expenditures will equal total output. This is because in a demand-determined model, the level of output is determined by the level of aggregate demand, and at equilibrium, aggregate demand will be equal to the level of output produced. Choices A, B, D, and E are not necessarily true at the equilibrium level of national income.

Consider a Simple Macro Model with Demand-Determined Output