Question

The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by

Group of answer choices

export spending.

government spending.

the level of aggregate expenditure.

Answer 1

The key idea of the aggregate expenditure model is that in any particular year, the level of GDP is determined mainly by the level of aggregate expenditure. As the aggregate expenditure is sum total of all the expenditures been under taken in the economy which are also known as GDP during a period of time.

No, the export spending does not determines the level of GDP. It is one of the reason for which the GDP of any economy increases but it doesn’t decides the level of GDP of the country.

No, the government spending does not determines the level of GDP of the economy. As a result of decreased taxes by the government, the disposable income increases, which translates a higher spending and GDP. Therefore the government spending is successful in increasing the level of GDP but it doesn’t give a determination to it.