In the aggregate expenditures model, an economy will be producing at the:
A) maximum investment level that is allowed by its savings.
B) intersection of real GDP and aggregate expenditures.
C) intersection of aggregate demand and aggregate supply.
D) point where government purchases equal taxes.

Question

Quizplus · Accepted Answer

In the aggregate expenditures model, equilibrium occurs where the total (aggregate) spending (or expenditures) in the economy equals the total production (or output), which is represented by real GDP. Therefore, the economy will be producing at the intersection of real GDP and aggregate expenditures.

In the Aggregate Expenditures Model, an Economy Will Be Producing