Chapter 10 - Aggregate Expenditure & Aggregate Demand

Question 1

Aggregate Expenditure Line

Answer 1

a relationship tracing for each level of PL, spending at each level of income (AKA RGDP)
C+I+G+(X-M)

Question 2

Income Expenditure Model(IEM)

Answer 2

45 degree line to track equilibrium

Other line is C+G+I+(X-M)

Question 3

Shifts to Income Expenditure Model (IEM)

Answer 3

Model can shift up or down when there is a change to C,I,G,(X-M)

Question 4

How to gauge change in IEM

Answer 4

dont look at direct change in expenditure, look at how equilibrium changes. Rise over initial equilibrium and see how line affected.
1/(1-MPC) or 1/MPS

Question 5

Simple Spending Multiplier

Answer 5

How RGDP demanded changes with an initial change in spending

1/(1-MPC) or 1/MPS

Question 6

With lower PLs

With Higher PLs

Answer 6

RGDP increases

RGDP decreases