The spending allocation model is designed to explain
A)short-run (monthly) movements in the economy.
B)movements in the CPI.
C)movements in the GDP deflator.
D)long-run (a period of years) movements in the economy.
E)why the production possibilities frontier is not a relevant concept in macroeconomics.

Question

Quizplus · Accepted Answer

The spending allocation model, also known as the aggregate expenditure model, is used to explain long-run movements in the economy, specifically changes in Gross Domestic Product (GDP). It shows the relationship between the total amount of spending in the economy (consumption, investment, government spending, and net exports) and the level of GDP.

The Spending Allocation Model Is Designed to Explain