Explain the Relationship Between Real GDP and Aggregate Planned Expenditure

question 4

Essay

Explain the relationship between real GDP and aggregate planned expenditure, AE. What change to inventories takes place when the two are not equal?

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Definitions:

Stimuli

External or internal events that elicit a physiological or psychological response.

Superstitious Behaviors

Actions linked to beliefs in supernatural causality, where an individual believes that a particular behavior will influence outcomes, irrespective of any logical connection.

Operant Conditioning

Operant conditioning is a learning process through which the strength of a behavior is modified by reinforcement or punishment.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired together; an unconditioned stimulus and a neutral stimulus, eventually causing the neutral stimulus to elicit the conditioned response alone.