Aggregate Expenditure model
Describe Aggregate Expenditure model and also state AD/AS model?
Expert
Aggregate Expenditure(AE) is a a way to measure the Gross Domestic Product, GDP, or National Income (NI).It is a measure of the level of economic activity.
GDP = C + I + G + Xn, where
I = Ip + Iu.
AE = C + Ip + G + Xn, where
C = Consumption Expenditure (CE)Ip = Planned InvestmentIu = Unplanned InvestmentG = Government expenditureXn = Net Exports (Exports-Imports)
AE is also used in the Aggregate Demand-Aggregate Supply Model (AD/AS) and includes Price changes.
In the model, Aggregate Expenditure (AE) is defined as the amount that firms and households plan to spend on goods and services at each level of income, which is nothing but the total of expenditures on consumption, investment, government expenses and net exports.
AD=C+I+G+X-M (function of price) AE=C+I+G+X-M (function of income) (DR Kevin LTL) AD increase with National Output, and rising Disposable Income (DI). If the present output exceeds the equilibrium, then the inventories will accumulate; encouraging businesses to slow down or stop production. This will move the economy towards equilibrium. Again, if the level of production is below the equilibrium, inventories will decrease, causing an increase in production and hence, moving toward equilibrium. This equilibration process continues to occur when the equilibrium is stable.
State main sources of demand for foreign currency? Answer: The four main sources of demand for foreign currency are as follows: A) To buy services and goods from other countries. B) To send a gift abroad.
Differentiate between APC and MPC. The value of which of them can be greater than another and when? Answer: APC is the average
Explain the concept of “economies of scale” and “increasing returns”.
Economic growth is measured by the rate of increase in national output, GDP. The output depends on inputs -labour, capital technology etc. the theories of economic growth bring out how and to what extent each input or factor contributes to the g
What occurs to economy, when credit availability is limited and credit is made costlier? Answer: Aggregate demands falls
Question: Was the stimulus package passed in 2009 as success? In answering this question the focus should be the articles on the syllabus, but you should also include opinions of other commentators. &nbs
Include graphs and should be 15 pages long
What are the strength and weakness of using per capital national income? give explained answer for query
Involuntary unemployment: Involuntary unemployment terms to a condition in which people that are willing to work are unable to obtain work.
Relevance of matter: Relevance of matter is very much important while choosing any goals. Are the goals relevant to the vision of the company? A goal of having maximum number of customers seems fantabulous, however at the same time bank needs to make
18,76,764
1923276 Asked
3,689
Active Tutors
1415006
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!