The sum of the components of aggregate expenditure that vary with real GDP is called
A) autonomous expenditures.
B) induced expenditures.
C) the MPC.
D) autonomous consumption.

Question

Quizplus · Accepted Answer

Induced expenditures are the components of aggregate expenditure (consumption, investment, and government spending) that vary as a result of changes in real GDP. Autonomous expenditures, such as government spending that does not change with changes in GDP, are excluded from the sum of induced expenditures. The MPC (marginal propensity to consume) is a separate concept that refers to the fraction of each additional dollar of income that is consumed. Autonomous consumption refers to the portion of consumption that does not depend on income or GDP.

The Sum of the Components of Aggregate Expenditure That Vary