Question

The aggregate expenditure model can be written in terms of four spending categories. Which equation shows the relationship between aggregate expenditure and the four spending​ categories?

Answer 1

The correct answer is AE = C + I + G + NX.

Step-by-step explanation:

Aggregate spending (in Keynes's opinion) is the key to economic activity, that is, what families, businesses and government plan to buy determines what companies will end up producing. In the first stage of the analysis, a simplified model excludes the government, assumes that there is no foreign sector, and that the level of real income or income (and not prices) is the main determinant of aggregate expenditure