In a simple model of the economy with demand-determined output,the equilibrium level of national income is at an income
A)to the right of the point where the AE curve intersects the 45-degree line.
B)to the left of the point where the AE curve intersects the 45-degree line.
C)where aggregate desired expenditure equals the value of total output.
D)where aggregate desired expenditure equals consumption.
E)where saving equals consumption.

Question

Quizplus · Accepted Answer

In a demand-determined output model, equilibrium occurs where aggregate desired expenditure (AE) equals the value of total output (Y). This is because in this model, changes in AE will result in changes in output, and vice versa, until they are equal at the equilibrium level of income. Thus, the correct answer is C.

In a Simple Model of the Economy with Demand-Determined Output,the