When prices do not change very much, the income-expenditure model can be used to understand economic fluctuation in the

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The income-expenditure model is most useful for understanding economic fluctuations in the short run, when prices do not change very much. This is because in the short run, output and employment levels can fluctuate due to changes in aggregate demand, while in the long run, prices and wages adjust to bring the economy back to its potential output level. Similarly, the fiscal year and federal budget allocation are more relevant to government spending and taxation policies, rather than economic fluctuations.

When Prices Do Not Change Very Much, the Income-Expenditure Model