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.
The origin of economic growth can be traced back to Adam Smith's Wealth of Nations. InSmith's view, economic growth of a nation depends on the 'division of labour' and specialization, and is limited by the limits of div
Explain the concept of “economies of scale” and “increasing returns”.
How prices allocate resources?
Macro Economics: Macro economics studies the economy as an entire.
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.
In calculating the GDP national income accountants:
What is the base of categorizing receipts into revenue and capital receipts?
The practice explores how monetary policy influences the economy and the type of factors which are significant in finding out the Monetary Policy Committee’s decision.
(a) Do you think that macroeconomic policy should be designed to achieve a measured unemployment rate of zero? Why or why not should this be the case?
What do you mean by the term Equilibrium? Also state its proper definition.
18,76,764
1928611 Asked
3,689
Active Tutors
1434121
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!