AP Macro Aggregate Expenditures Model

What is the basic idea of the aggregate expenditures model?

• Amount of goods and services produced depends on agriculture
• Amount of goods and services sold depends on expenditures
• Amount of goods and services, as well as employment level depend on total spending
• Employment level has no impact on the aggregate expenditures

Businesses will only produce...

• What they are absolutely sure they will profit on

• What they think can sell at a profit

• What the consumers have a shortage of

• Whatever will appeal to the young folks

Which is the equation used to find the equilibrium GDP?

• C+I_g=GDP

• G+D+P=GDP

• C-I_g=GDP

• C-I_g=GPD

Which one is a constant in the aggregate expenditure function?

• Consumption

• Investment

• GDP

• None of the above

When aggregate expenditures rise, total output and employment...

• increase

• decrease

• stay constant

• rise and fall

What does an investment schedule graph look like?

• 
• 
• 

Aggregate expenditures is to GDP as planned investment is to _______.

• disequilibrium

• GDP

• consumption

• saving

What effect does investment have on the income-expenditures stream?

• Injections of spending increase total output.

• These leakages decrease total output.

• Investment is constant so it doesn't matter.

What effect does saving have on income-expenditures?

• Saving increases total output because of inflation.

• Saving is a leakage or withdrawal that decreases total output

• Money that is saved isn't used so it doesn't have an effect

In total spending, investment often replaces losses that were due to...

• wars

• Blair Walsh

• unplanned changes in inventories

• saving