The aggregate expenditure (AE)function is an upward-sloping curve that describes
A)the amount spent on an economy's output at each national income.
B)what firms and households would like to spend at each level of national income.
C)what an economy would like to spend,in the absence of income constraints,at each level of output.
D)what is actually spent on an economy's output at each level of output.
E)what is actually spent at each level of national income.

Question

Quizplus · Accepted Answer

The aggregate expenditure (AE) function is a theoretical construct that represents the total spending in an economy at each level of national income. It is derived by summing up the spending of all the households, firms, and the government in an economy. The upward-sloping curve of the AE function represents the fact that as national income increases, households and firms are willing to spend more. Therefore, option B is the most appropriate answer as it describes what firms and households would like to spend at each level of national income.

The Aggregate Expenditure (AE)function Is an Upward-Sloping Curve That Describes