The equilibrium quantity of aggregate output occurs when
A)the economy reaches the full employment of labor
B)planned aggregate expenditure equals income generated from production
C)actual aggregate expenditures equal real GDP
D)inventories of goods and services are increasing
E)inventories of goods and services are decreasing

Question

Quizplus · Accepted Answer

The equilibrium quantity of aggregate output occurs when there is a balance between planned aggregate expenditure (the total amount that firms and households desire to spend on goods and services) and the income generated from production. When these two are equal, there is no incentive for firms to increase or decrease production, meaning that the economy is at a stable equilibrium. At this point, there is no excess supply or demand in the market, which leads to stable prices, output, and employment.

The Equilibrium Quantity of Aggregate Output Occurs When