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In the keynesian model of aggregate expenditure real GDP is determined by what?
Wiki User
∙ 16y ago
The aggregate expenditure model relates aggregate expenditures, which is the sum of planned level of consumption + investment + government purchases + net exports at a given price level, to the level of GDP. The key word here is planned.
GDP is the same as aggregate expenditures(AE) except for one difference.
People, firms and governments don't always spend what they had planned.
So AE differs from GDP in that it deals exclusively with amounts firms intend to invest, and not necessarily taking into account amounts that will actually be invested as in GDP
Where GDP is defined as C + I + G + NX and I = Ip + Iu
(planned + unplanned investment), Aggregate Expenditures is defined as
C + Ip + G + NX.
AE (Aggregate Expenditure) is used in conjunction with GDP in the Aggregate Expenditures Model to predict future GDP direction. In this model, when AE = GDP then the economy is in equilibrium. According to this model an economy will move towards its equilibrium causing changes in the GDP.
Wiki User
∙ 16y ago
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What does investment affect in the keynesian model?
Government expenditure.
How does the leakages and injections in the aggregate expenditure model influence the level of GDP of an economy?
How does the leakages and injections in the aggregate expenditure model influence the level of GDP of an economy?
What is IS-LM model?
It is a diagrammatic representation of a model of aggregate demand determination based upon the locus ofequilibrium points in the aggregate expenditure sector (IS) and the monetary sector(LM).
Derive aggregate demand curve from aggregate expenditure model?
an increase in price level would lead to a fall in AE, vice versa. So by plotting those points out, you can derive an AD curve
Difference between keynesian model and AD-AS model?
Keynesian model is able to show how leakages and injections can influence the economy. AD-AS model is able to show changes in prices (inflation).
What does investment affect in the keynesian model?
Government expenditure.
How does the leakages and injections in the aggregate expenditure model influence the level of GDP of an economy?
How does the leakages and injections in the aggregate expenditure model influence the level of GDP of an economy?
What is IS-LM model?
It is a diagrammatic representation of a model of aggregate demand determination based upon the locus ofequilibrium points in the aggregate expenditure sector (IS) and the monetary sector(LM).
What is IS LM model?
It is a diagrammatic representation of a model of aggregate demand determination based upon the locus ofequilibrium points in the aggregate expenditure sector (IS) and the monetary sector(LM).
What is an expenditure multiplier model?
The model tells you how much you need to multiply an initial autonomous change in AD (aggregate demand) to determine the total change in AD.
Derive aggregate demand curve from aggregate expenditure model?
an increase in price level would lead to a fall in AE, vice versa. So by plotting those points out, you can derive an AD curve
Difference between keynesian model and AD-AS model?
Keynesian model is able to show how leakages and injections can influence the economy. AD-AS model is able to show changes in prices (inflation).
What are the four sectors in Keynesian macroeconomic model?
The four sectors in Keynesian macroeconomic model are business, household, foreign sector and government. The Keynesian macroeconomics focuses on a broad scale where the above mentioned sectors play an important role.
The quantity of full employment in the aggregate supply aggregate demand model is similar to the conditions in which other model?
The quantity of full employment in the aggregate supply aggregate demand model is similar to the conditions in which other model. (Market Supply and Demand.)
What is the price level assumed to be in the simple Keynesian model of determination of income?
exogenous and constant
What are the determinants of induced consumption in Keynesian model of a closed economy with a government sector?
Income and taxes
Using the AD-AS framework what is the impact on equilibrium price and output when there are increase in aggregate demand and aggregate supply simultaneously?
AD-AS represents aggregate demand curve (AD) and aggregate supply curve (AS). "In the aggregate demand-aggregate supply model, each point on the aggregate demand curve is an outcome of the IS-LM model for aggregate demand Y based on a particular price level. Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS-LM model for that price level, if one considers a higher potential price level, in the IS-LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower aggregate demand; hence at the higher price level the level of aggregate demand is lower, so the aggregate demand curve is negatively sloped
