In the aggregate expenditures model, in equilibrium,
A) aggregate expenditures equal real GDP produced.
B) inventory changes equal saving.
C) inventory changes equal investment.
D) aggregate expenditures equal consumption.

Question

Quizplus · Accepted Answer

In the aggregate expenditures model, equilibrium is reached when aggregate expenditures (total spending) equal real GDP (total production). This means that all goods and services produced are being purchased by households, businesses, and the government, and there are no excess inventories (inventory changes are zero). Hence, choice A is the correct answer.

In the Aggregate Expenditures Model, in Equilibrium