Equilibrium national income where aggregate demand equals output

Steps:

• Identify the components of aggregate demand (AD) from the table: consumption (C), investment (I), government spending (G), and net exports (NX).
• Calculate AD at each income level using the formula AD = C + I + G + NX.
• Find the income level (Y) where Y = AD, indicating equilibrium.
• Verify by checking if injections equal leakages or using the 45-degree line intersection.

Why C is correct:

• At $800 million, Y exactly equals AD per the Keynesian equilibrium condition Y = C + I + G + NX.

Why the others are wrong:

• A: At $600 million, AD exceeds Y, creating unplanned inventory accumulation.
• B: At $700 million, AD still exceeds Y, leading to output expansion.
• D: At $900 million, Y exceeds AD, causing unplanned inventory buildup and contraction.

Final answer: C