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

Question

Quizplus · Accepted Answer

In a demand-determined macro model, the equilibrium level of national income is where the aggregate expenditure (AE) curve intersects the 45-degree line, which represents the situation where output (income) equals desired expenditure. At this point, there is no unplanned inventory accumulation or depletion, and the economy is in equilibrium. Therefore, the correct answer is (C) where the AE curve intersects the 45-degree line.

In a Simple Macro Model with Demand- Determined Output, the Equilibrium