In the aggregate expenditures model, it is assumed that investment
A) automatically changes in response to changes in real GDP.
B) changes by less in percentage terms than changes in real GDP.
C) does not respond to changes in interest rates.
D) does not change when real GDP changes.

Question

Quizplus · Accepted Answer

In the aggregate expenditures model, investment is typically assumed to be autonomous, meaning it does not change in response to changes in real GDP. This simplification allows for easier analysis of the economy's equilibrium without considering the complexities of investment behavior.

In the Aggregate Expenditures Model, It Is Assumed That Investment