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What is Understanding the Aggregate Expenditure Model about?

The aggregate expenditure model focuses on short-run relationships between total spending and real GDP. It assumes prices are constant. Aggregate expenditure is the total spending in the economy and equals consumption + planned investment + government purchases + net exports. Macroeconomic equilibrium occurs when aggregate expenditure equals real GDP. When expenditure is less than GDP, inventories rise, and when expenditure exceeds GDP, inventories fall and output rises.

Author

Beatriz Canchila

Language

EN