Final answer:
Equilibrium in economics occurs when aggregate expenditure equals national income, showing a balance in the economy. At a national income of $300, this equilibrium is not achieved because expenditures do not match the output. Equilibrium is reached at a national income of $500, where planned expenditures and output are equal.
Step-by-step explanation:
Equilibrium in the context of the income-expenditure approach is when aggregate expenditure (AE) is equal to the national income (Y). The Keynesian model posits that in the absence of income, there is autonomous consumption, which in this scenario is $20. With a marginal propensity to save (MPS) of 0.1 and taxes at 0.2 of GDP, injections such as investment ($70), government spending ($80), and exports ($50) contribute to the economy. Meanwhile, leakages, which include savings, taxes, and imports (0.2 of after-tax income), counteract these injections. Equilibrium is where total leakages equal total injections.
A national income of $300 is not at equilibrium because at this point, the aggregate expenditures do not match the output exactly. To be considered at equilibrium, the total expenditure must be equal to the total income produced within the economy, which is the case when the national income is $500, as indicated in Table B5 or D5.
Equilibrium is achieved when all economic transactions balance each other out, meaning the total amount the economy is spending is equal to what it is producing, with no unintended inventory buildup or depletion. It is the point where planned and actual aggregate expenditures are equal, illustrating the balance between savings and investments, and between imports and exports.