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.
Define bank rate policy? How does it operate as a technique of credit control? Answer: Bank rate is the rate at which the central bank provides loans to the commerc
What do you mean by the term Competitive market?
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
Macro Economics: Macro economics studies the economy as an entire.
How can we analyze the number of event that influences the market?
Most economists believe such that people increase an activity when they perceive the expected additional benefits as exceeding the expected extra cost, but decrease their level of an activity whenever they believe the benefits from the last few units of the activity a
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
What are the “powers of the Federal Reserve
Why are receipts from taxes classified as revenue receipts? Answer: Receipts from taxes are classified as revenue receipts since they do not build liabilities nor r
Why the repayment of loan is a capital expenditure? Answer: Repayment of loan is taken as a capital expenditure since it diminishes the liabilities of Government.
18,76,764
1939958 Asked
3,689
Active Tutors
1418830
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!