Final answer:
The formula for aggregate expenditure (AE) in the given macroeconomic model is AE = C + I + G + X - M. Changes in consumption and investment directly affect aggregate expenditure in this model.
Step-by-step explanation:
The formula for aggregate expenditure (AE) in the given macroeconomic model is AE = C + I + G + X - M.
In this model, changes in consumption and investment affect aggregate expenditure as follows:
- Changes in consumption (C) affect aggregate expenditure directly. An increase in consumption will lead to an increase in aggregate expenditure, and a decrease in consumption will lead to a decrease in aggregate expenditure.
- Changes in investment (I) also affect aggregate expenditure directly. An increase in investment will increase aggregate expenditure, and a decrease in investment will decrease aggregate expenditure.