The aggregate expenditure model is
A)most useful in explaining situations where changes in aggregate expenditures cause the price level to change
B)not useful in situations where changes in aggregate expenditures cause the price level to change
C)helpful in explaining situations where the economy is plagued by inflationary pressures
D)the reciprocal of the aggregate demand model
E)most useful when we are dealing with an economy dominated by a foreign sector

Question

Quizplus · Accepted Answer

The aggregate expenditure model is primarily used to explain how changes in aggregate expenditures affect output and employment, not the price level. It is most useful in a fixed price level context.

The Aggregate Expenditure Model Is