Question

When analyzing AE, it is important to know the factors that determine C, Ip, G and NX because those factors A. influence the level of AE and help us understand the GDP in the economy. B. show us how macroeconomic equilibrium is determined in the AE model. C. helps us understand how AE and real GDP are related. D. All of the above.

Answer 1

D. All of the above.

Step-by-step explanation:

In the Aggregate Expenditure model or approach to GDP, GDP is calculated using the following formula:

GDP = C + I + G + NX (X-M)

Where:

• C = consumption
• I = Investment
• G = Government spending
• NX = Net exports

As can be seen, each of the elements of the equation are necessary to understand (calculate) GDP by the AE approach. Each element is also important to show how macroeconomic equilibrium is reached. Thus, the correct answer is D.