In the short run model, equilibrium real GDP occurs when:
A) households spend all their income on consumption.
B) businesses cannot produce any more goods and services.
C) real GDP (Y) equals planned aggregate expenditure (AE).
D) business investment expenditure is zero.

Question

Quizplus · Accepted Answer

Equilibrium real GDP in the short run occurs when the total output (real GDP or Y) equals the total planned spending (planned aggregate expenditure or AE). This is when the amount of goods and services produced is exactly equal to the amount of goods and services demanded.

In the Short Run Model, Equilibrium Real GDP Occurs When