Which of the following correctly describes the meaning of the aggregate expenditure (AE)function?
A)The AE function relates the level of desired aggregate expenditure to the level of actual national income.
B)The AE function relates the level of desired consumption expenditure to desired aggregate expenditure.
C)The AE function relates the level of desired investment expenditure to desired aggregate expenditure.
D)The AE function relates the level of nominal GDP to the level of real GDP.
E)The AE function relates the level of desired aggregate expenditure to the price level.

Question

Quizplus · Accepted Answer

The aggregate expenditure (AE) function is a relationship between the total planned spending in an economy and the level of aggregate output. It shows the level of desired aggregate expenditure, which includes consumption expenditure, investment expenditure, government expenditure, and net exports, at different levels of real GDP. Therefore, choice A is the correct interpretation of the meaning of the AE function.

Which of the Following Correctly Describes the Meaning of the Aggregate