Correct Option
The correct option is Ex ante output equals ex ante aggregate demand.
Explanation
In macroeconomics, the equilibrium in the final goods market is determined by the interaction of Aggregate Demand (AD) and Aggregate Supply (AS). A crucial distinction exists between ex (planned or intended) variables and ex post (actual or realized) variables. Equilibrium is a state where the plans of producers match the plans of consumers and investors.
Option Analysis
- Ex ante consumption equals ex ante investment. is Incorrect: The condition for equilibrium in a simple economy is that Savings ($S$) equals Investment ($I$), specifically ex ante savings equals ex ante investment. There is no theoretical condition requiring Consumption ($C$) to equal Investment ($I$).
- Ex ante output equals ex ante aggregate demand. is Correct: The final goods market is in equilibrium when ex ante output (the quantity producers plan to produce) equals ex ante aggregate demand (the quantity households and firms plan to purchase). Mathematically, this is expressed as $Y = C + I$ (where all variables are planned). If this equality holds, there is no unplanned accumulation or decumulation of inventories.
- Actual output equals actual demand. is Incorrect: Actual (ex post) output always equals actual aggregate demand due to national income accounting identities. If planned demand falls short of production, the unsold goods are recorded as unplanned inventory investment. Therefore, actual output equals actual expenditure by definition, regardless of whether the market is in equilibrium.
- Inventory investment is positive. is Incorrect: Positive inventory investment can be voluntary (planned) or involuntary (unplanned). If it is unplanned (due to lack of demand), the market is in disequilibrium. Therefore, merely having positive inventory investment does not define equilibrium.
Key Takeaway: Economic equilibrium is defined by the equality of ex (planned) variables ($AD = AS$ or $S = I$). Ex post (actual) equality is an accounting identity that holds true at all times, even during disequilibrium.