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.
Describe why businessmen mostly wish to open current account in bank?
Fiscal policy measures used for achieving full-employment level of output and price include increase in the government expenditure and cut in tax rates. A cut in tax rates eliminates only the adverse effect of high tax rates, whereas an increase in government expendit
Meaning of Fiscal policy:Fiscal policy is the set of decisions and principles of a government regarding the extent of public expenses and mode of financing them. It is about the attempt of g
Implications of fiscal deficit: (A) High fiscal deficit entails a big amount of borrowings in which the government takes more loans to pay back it. It raises the liability of government. Q : Expenditure of money on party effects When you pay a straight A student in advance to write up your term paper and that person expends the money on a party and then, hung-over, can’t do a good job and hence you wind up with an F for submitting sloppily written gibberish, you encompass just suffered
When you pay a straight A student in advance to write up your term paper and that person expends the money on a party and then, hung-over, can’t do a good job and hence you wind up with an F for submitting sloppily written gibberish, you encompass just suffered
Explain the term Shut Down Price? Illustrate it.
What is Demand schedule and how it is associated to demand curve?
The most probable of the following to be a poorer good for most American families who purchase some of each of such products throughout a given year would be: (i) Plastic surgery. (ii) College textbooks. (iii) Films on DVD. (iv) Cup-a-Noodles soup. (v) Downloads for t
Why the borrowings by Government are taken as capital receipts?
Question: Suppose firm 1 and firm 2 merge. Call the new firm A. It has output xA and profit πA. Suppose there is Cournot competition after the merger. For now, we assume that the marginal cost of Firm A, the mer
18,76,764
1951521 Asked
3,689
Active Tutors
1453476
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!