What is the key idea in the aggregate expenditure macroeconomic model? The key idea in the aggregate expenditure model is that

A. in any particular year, the level of GDP is determined mainly by the level of aggregate expenditure.

B. in any particular year, the level of potential real GDP is determined by the level of aggregate expenditure.

C. long run economic growth is determined by the level of aggregate expenditure.

D. in any particular year, the inflation rate is determined only by the level of aggregate expenditure.

Question

Casey Roach

Business

1 January, 00:55

What is the key idea in the aggregate expenditure macroeconomic model? The key idea in the aggregate expenditure model is that

A. in any particular year, the level of GDP is determined mainly by the level of aggregate expenditure.

B. in any particular year, the level of potential real GDP is determined by the level of aggregate expenditure.

C. long run economic growth is determined by the level of aggregate expenditure.

D. in any particular year, the inflation rate is determined only by the level of aggregate expenditure.

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Answers (1)

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Layne Schaefer · Answer 1

A) in any particular year, the level of GDP is determined mainly by the level of aggregate expenditure.

Explanation:

The formula for calculating the aggregate expenditure (AE) of an economy is the same used to calculate the gross domestic product:

Aggregate expenditures = consumption + investment + government + net exports (exports - imports)

The main difference between the GDP ans AE is that AE measures the planned consumption, the planned investment, the planned government expenses and the planned net exports.

he equation is: AE = C + I + G + NX. The aggregate expenditure determines the total amount that firms and households plan to spend on goods and services at each level of income.