The Aggregate Expenditure Model Is

question 92

Multiple Choice

The aggregate expenditure model is

• A)most useful in explaining situations where changes in aggregate expenditures cause the price level to change
• B)not useful in situations where changes in aggregate expenditures cause the price level to change
• C)helpful in explaining situations where the economy is plagued by inflationary pressures
• D)the reciprocal of the aggregate demand model
• E)most useful when we are dealing with an economy dominated by a foreign sector

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Definitions:

45-Degree Line

In economics, a graphical representation used in Keynesian cross diagrams, where the line represents points where aggregate expenditure equals national income.

APC

The average propensity to consume, which is the ratio of consumption spending to disposable income.

Dissaving

Occurs when individuals withdraw funds from their savings, often due to expenditures exceeding income during a specific period.

Autonomous Consumption

The level of consumption that occurs when income is zero; it is the base level of spending that must occur even if an individual has no income.