The aggregate expenditure line,along with the 45-degree line,determines equilibrium.This model is based on the assumption that
A)production is constant
B)production is constant and at the full employment level of GDP
C)producers are ready to supply whatever amount of output is demanded at the existing price level
D)producers will supply more at higher prices than they will at lower prices
E)producers will supply more at lower prices than they will at higher prices

Question

Quizplus · Accepted Answer

The aggregate expenditure model assumes that producers are willing to supply whatever amount of output is demanded at the existing price level, which is why the equilibrium is determined by the intersection of the aggregate expenditure line and the 45-degree line.

The Aggregate Expenditure Line,along with the 45-Degree Line,determines Equilibrium