In the Keynesian aggregate expenditure model,the equilibrium level of income is achieved when
A)the employment rate equals approximately 96 percent.
B)actual saving equals actual investment.
C)planned aggregate expenditures exceed actual output.
D)actual output equals planned aggregate expenditures.

Question

Quizplus · Accepted Answer

According to the Keynesian aggregate expenditure model, equilibrium is achieved when actual output (income) equals planned aggregate expenditures. This is because if output is lower than planned expenditure, firms will increase production to meet demand, increasing income. If output is higher than planned expenditure, firms will decrease production, decreasing income until it matches planned expenditure. Therefore, the correct choice is D - actual output equals planned aggregate expenditures.

In the Keynesian Aggregate Expenditure Model,the Equilibrium Level of Income