The aggregate expenditure model focuses on the short-run relationship between ________ and ________.
A)real spending; real GDP
B)unemployment; inflation
C)nominal spending; nominal GDP
D)planned inventories; unplanned inventories
E)nominal spending; and real savings

Question

Quizplus · Accepted Answer

The aggregate expenditure model focuses on the short-run relationship between real spending (expenditures by households, businesses, governments, and foreigners) and real GDP (the total output of goods and services produced in the economy). The model suggests that changes in spending will lead to corresponding changes in output in the short run, with the size of the effect depending on the economy's level of spare capacity.

The Aggregate Expenditure Model Focuses on the Short-Run Relationship Between