If national income is demand- determined, the condition for national income to be in equilibrium can be stated as:
A)AE must be greater than Y.
B)actual saving equals actual investment.
C)unemployment must equal the natural unemployment rate.
D)desired saving equals actual investment.
E)desired aggregate expenditure equals the actual level of national income.

Question

Quizplus · Accepted Answer

National income is demand-determined in the short run according to Keynesian economics. Therefore, in order for national income to be in equilibrium, the level of desired aggregate expenditure must equal the actual level of national income. This can be represented by the equation Y = AE.

If National Income Is Demand- Determined, the Condition for National