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

Question

Quizplus · Accepted Answer

In a demand-determined output model, equilibrium level of national income is determined by the point where desired aggregate expenditures (which includes consumption, investment, and government spending) equals total output. Therefore, the correct statement is that at the equilibrium level of national income, desired aggregate expenditures will equal total output. Choices A, B, C, and D are incorrect because they do not accurately describe the equilibrium condition in a demand-determined output model.

Consider a Simple Macro Model with Demand- Determined Output