In the Keynesian Aggregate Expenditure Model, the Equilibrium Level of Income

question 2

Multiple Choice

In the Keynesian aggregate expenditure model, the equilibrium level of income is achieved when

• A) actual saving equals actual investment.
• B) planned aggregate expenditures equal total output.
• C) consumption equals income times the marginal propensity to consume.
• D) the marginal propensity to consume equals planned output.

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Definitions:

Tax Rate

The proportion of income that is required to be paid as tax by a person or a company.

Real Interest Rate

The real interest rate is the interest rate adjusted for inflation, representing the true cost of borrowing and the true yield for savers.

Nominal Return

The rate of return on an investment without adjusting for inflation.

Tax Rate

The tax rate is the percentage at which an individual or corporation is taxed by the government on income or property.