In the simplest macroeconomic model, with a closed economy and no government, the aggregate expenditure (AE)function is the sum of
A)desired consumption and desired investment.
B)consumption and disposable income.
C)actual consumption and actual investment.
D)saving and desired investment.
E)consumption and saving.

Question

Quizplus · Accepted Answer

In a closed economy with no government, the aggregate expenditure (AE) function is the sum of desired consumption and desired investment since these are the two main components of spending. This is in contrast to the actual consumption and actual investment, which may differ from what is desired due to factors such as unexpected changes in income or interest rates. Saving is not included in the aggregate expenditure function, as it represents the portion of income not spent on consumption or investment.

In the Simplest Macroeconomic Model, with a Closed Economy and No