Question

Macroeconomic equilibrium occurs where:

Options

• Ex ante aggregate demand exceeds ex ante aggregate supply

• Ex ante aggregate demand equals ex ante aggregate supply

• Autonomous consumption equals autonomous investment

• The price level equals the equilibrium income

Answer 1

Equilibrium is shown by combining ex ante aggregate demand and aggregate supply in one diagram. Equilibrium occurs where ex ante aggregate demand equals ex ante aggregate supply. This occurs at equilibrium point E, with the equilibrium level of income OY₁.