# components of aggregate expenditure

It can be found by determining the intersection of AE1 and the 45-degree line. Now suppose that planned investment increases from the original value of \$1,100 billion to a new value of \$1,400 billion—an increase of \$300 billion. The aggregate expenditures function is the relationship of aggregate expenditures to the value of real GDP. Notice, however, that the new aggregate expenditures curve intersects the 45-degree line at a real GDP of \$8,500 billion. Suppose that the only difference between real GDP and disposable personal income is personal income taxes. People will only invest in projects if they offer higher returns than the interest rate, so when the interest rate is lower, more projects pass this test and investment is higher. Discuss the differences between statistics as numerical facts and statistics as a discipline or field of study. Second, notice that the slope of the aggregate expenditures curve is flatter for the more realistic economy in Panel (b) than it is for the simplified economy in Panel (a). Among three categories of investment, namely, purchase of new buildings, addition to stock and investment in fixed plant or machinery, the investment demand is focussed on last category, i.e., machinery.

Instructions: Enter your responses as whole numbers. Figure 13.11 The Aggregate Expenditures Function: Comparison of a Simplified Economy and a More Realistic Economy. But that second round of increase in real GDP induces \$192 billion (= 0.8 × \$240) in additional consumption, creating still more production, still more income, and still more consumption. Equation 13.11 is the algebraic representation of the aggregate expenditures function.

Aggregate expenditures equal total planned spending on that output. Your instructor may lead a class discussion on the findings. Principles of Microeconomics (MindTap Course List), ECON: MICRO4 (New, Engaging Titles from 4LTR Press), Principles of Macroeconomics (MindTap Course List), Brief Principles of Macroeconomics (MindTap Course List), Principles of Economics (MindTap Course List), Fundamentals of Financial Management (MindTap Course List), Fundamentals of Financial Management, Concise Edition (MindTap Course List), Foundations of Business (MindTap Course List), Essentials of Business Communication (MindTap Course List), Essentials of Economics (MindTap Course List), Statistics for Business & Economics, Revised (MindTap Course List), Managerial Accounting: The Cornerstone of Business Decision-Making, College Accounting (Book Only): A Career Approach, Intermediate Accounting: Reporting And Analysis, Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List), College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry), Cornerstones of Cost Management (Cornerstones Series), Microeconomics: Private and Public Choice (MindTap Course List), Macroeconomics: Private and Public Choice (MindTap Course List), Economics: Private and Public Choice (MindTap Course List), Understanding Management (MindTap Course List), Find more solutions based on key concepts.