### Income-Expenditure Model Analysis#### Figure 9.1: Income-Expenditure Model GraphThe figure below illustrates the income-expenditure model. The graph has "Aggregate expenditure (in billion dollars)" on the y-axis and "Real GDP (in billion dollars)" on the x-axis.![Income-Expenditure Model](link-to-image)#### Explanation of Graph:The graph consists of two lines:1. A diagonal line representing all points where aggregate expenditure equals real GDP.2. Another line labeled "C+I+G+(X-M)", which depicts the aggregate expenditure.Three points, A, B, and C, are marked on the “C+I+G+(X-M)” line:- Point **A** is situated above the diagonal line.- Point **B** is also above the diagonal line.- Point **C** is below the diagonal line.#### Corresponding Question:Based on the graph, determine what occurs at point C. Here are the options:a. Producers experience an unexpected accumulation of inventory.b. Consumption expenditure exceeds disposable income.c. Aggregate expenditure is exactly equal to real GDP.d. Real GDP exceeds aggregate expenditure.e. Producers experience an unexpected loss of inventory.**Option d** is correct: At point C, real GDP exceeds aggregate expenditure. This typically implies that producers are producing more goods than are being consumed, leading to an accumulation of unsold inventory.

Aggregate expenditure: - it is the present value of all final goods and services produced in an…

The figure given below shows the income-expenditure model. At point C, Figure 9.1 Aggregate expenditure (in billion dollars) C+I+G+(X-M) A B Real GDP (in billion dollars) a. producers experience an unexpected accumulation of inventory O b. consumption expenditure exceeds disposable income c. aggregate expenditure is exactly equal to real GDP d. real GDP exceeds aggregate expenditure O e. producers experience an unexpected loss of inventory

The figure given below shows the income-expenditure model. At point C, Figure 9.1 Aggregate expenditure (in billion dollars) C+I+G+(X-M) A B Real GDP (in billion dollars) a. producers experience an unexpected accumulation of inventory O b. consumption expenditure exceeds disposable income c. aggregate expenditure is exactly equal to real GDP d. real GDP exceeds aggregate expenditure O e. producers experience an unexpected loss of inventory

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

### Income-Expenditure Model Analysis

#### Figure 9.1: Income-Expenditure Model Graph

The figure below illustrates the income-expenditure model. The graph has "Aggregate expenditure (in billion dollars)" on the y-axis and "Real GDP (in billion dollars)" on the x-axis.

![Income-Expenditure Model](link-to-image)

#### Explanation of Graph:
The graph consists of two lines:
1. A diagonal line representing all points where aggregate expenditure equals real GDP.
2. Another line labeled "C+I+G+(X-M)", which depicts the aggregate expenditure.

Three points, A, B, and C, are marked on the “C+I+G+(X-M)” line:
- Point **A** is situated above the diagonal line.
- Point **B** is also above the diagonal line.
- Point **C** is below the diagonal line.

#### Corresponding Question:
Based on the graph, determine what occurs at point C. Here are the options:

a. Producers experience an unexpected accumulation of inventory.
b. Consumption expenditure exceeds disposable income.
c. Aggregate expenditure is exactly equal to real GDP.
d. Real GDP exceeds aggregate expenditure.
e. Producers experience an unexpected loss of inventory.

**Option d** is correct: At point C, real GDP exceeds aggregate expenditure. This typically implies that producers are producing more goods than are being consumed, leading to an accumulation of unsold inventory.

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