If an economy is operating at a point on the C + I line that lies above the 45-degree line
A) the economy is in equilibrium.
B) the C + I line shifts down.
C) GDP will rise.
D) unwanted inventories will accumulate.
E) intended saving equals intended investment.

Question

Quizplus · Accepted Answer

Operating above the 45-degree line indicates that planned aggregate expenditures (C + I) exceed actual output (GDP). This suggests that there will be upward pressure on output, and GDP will rise until it reaches the equilibrium point where C + I equals GDP. Therefore, choice C is correct. A is incorrect as the economy is not yet in equilibrium. B is incorrect as there is no information to suggest that the C + I line shifts down. D is incorrect as the situation implies the need to increase output, making unwanted inventories unlikely. E is incorrect because intended saving does not necessarily equal intended investment in this scenario.

If an Economy Is Operating at a Point on the C