An assumption that is inconsistent with the aggregate expenditures model is that:
A) the short run is the time period of focus.
B) the price level is fixed.
C) there is no relationship between aggregate expenditures and real GDP.
D) the model is most accurate when the economy is at less than full employment (below the natural rate).

Question

Quizplus · Accepted Answer

The aggregate expenditures model assumes a direct relationship between aggregate expenditures and real GDP, meaning as aggregate expenditures increase, real GDP increases, and vice versa. This contradicts choice C, which states there is no relationship between the two.

An Assumption That Is Inconsistent with the Aggregate Expenditures Model