To Simplify the Aggregate Expenditure Model, What Must Be Assumed

question 41

Multiple Choice

To simplify the aggregate expenditure model, what must be assumed?  

• A) that there is no consumption 
• B) that there are no government purchases 
• C) that there is no net private investment 
• D) that there is no capital depreciation and no business saving

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Definitions:

Market Equilibrium

Occurs when the quantity of a product demanded by consumers equals the quantity supplied by producers, leading to a stable price.

Socially Optimal Level

An economic condition where resources are allocated in a way that maximizes the overall benefit to society, considering both efficiency and equity.

Regulation

A rule or directive made and maintained by an authority.

Taxation

The process by which governments charge fees on individuals and corporations to fund public services and infrastructure.