Question

In the short-run model, when planned aggregate expenditure equals output, _____.

Answer 1

In the short-run model, equilibrium occurs when planned aggregate expenditure equals output, indicating balanced spending and production levels.

Step-by-step explanation:

In the short-run model, when planned aggregate expenditure equals output, the economy is in equilibrium. At this point, the levels of aggregate expenditure and output are the same, reflecting a state where the amount of goods and services produced is equal to the total spending on these goods and services. This equilibrium condition is graphically represented on a Keynesian cross diagram where the aggregate expenditure function intersects the 45-degree line, indicating that all output produced is being purchased and there is no unplanned inventory accumulation.