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The expenditure approach to measuring GDP suggests that GDP is the total expenditure on goods and...

  1. The expenditure approach to measuring GDP suggests that GDP is the total expenditure on goods and services by households (C), investors (I), government (G) and net exports (X-M). Discuss the economic policies that are implemented by the government to boost the aggregate demand in the Australian economy – mention and discuss one distinct policy for each expenditure items.

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Answer #1

Answer - If the government provides stimulus check to the unemployed persons, during the pandemic , this will result in the increased Consumption of the household. Hence the C component of AD will rise.

When the government provides the subsidies to the businesses , their cost of production decreases because they will not have to bear the full cost of production. As a result they increase their investment in business to increase the supply. This leads to the rise in I component of AD.

When the government purchases a new Aircraft for the Defence purposes , it will be added to the G component of AD. Also this will lead rise in imports.

The policy of the government to provide the export subsidies and creation of SEZ's will lead to rise in exports of country and increase amount of net export which is a component of AD

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