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If an economy has an aggregate output of $20 trillion, then aggregate income is ________.

1) $10 trillion
2) $20 trillion
3) $30 trillion
4) $40 trillion

Answer :

Final answer:

If an economy has an aggregate output of $20 trillion, the aggregate income is also $20 trillion because the value of total production equals total income in the circular flow of the economy.

Explanation:

If an economy has an aggregate output of $20 trillion, then the aggregate income is also $20 trillion. This concept is based on the idea that in the circular flow of the economy, the value of total production (which is aggregate output in this case) must equal the total income generated from that production. The reason for this equality is that every dollar spent on the production of goods and services must eventually go to some factor of production as income, such as wages, rent, interest, and profit.

Therefore, if the economy is currently operating at an output level of $1,200 billion, it is below its potential output level of $10 trillion, which indicates that there might be room for economic growth. In such a scenario, the real GDP is expected to increase in the future until it reaches its potential level, assuming no other changes occur in the economy.

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Rewritten by : Jeany

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