In the Keynesian aggregate expenditure model, the 45-degree line indicates:
A)amounts households plan to spend at each possible level of income.
B)amounts households plan to save at each possible level of income.
C)all income levels at which the planned spending of decision makers equals total output.
D)all income levels at which the marginal propensity to consume is one.

Question

Quizplus · Accepted Answer

The 45-degree line in the Keynesian aggregate expenditure model represents points where total planned spending equals total output, indicating equilibrium in the economy.

In the Keynesian Aggregate Expenditure Model, the 45-Degree Line Indicates