In the aggregate expenditure (AE) model, the economy is driven to its equilibrium by changes in
A) government expenditures on goods and services that are the result of changes in real GDP.
B) induced expenditures that are the result of changes in real GDP.
C) investment that are the result of changes in real GDP.
D) autonomous expenditures that are the result of changes in real GDP.
E) net taxes that are the result of changes in real GDP.

Question

Quizplus · Accepted Answer

In the AE model, equilibrium is achieved when planned aggregate expenditure equals actual GDP. Induced expenditures, which change with real GDP, help drive the economy to this equilibrium.

In the Aggregate Expenditure (AE) Model, the Economy Is Driven