One basic assumption of the aggregate expenditures model is that:
A) The economy is operating at full employment
B) There is inflation in the economy
C) There is no public sector in the economy
D) The average price level in the economy is fixed

Question

Quizplus · Accepted Answer

The aggregate expenditures model assumes that the average price level in the economy is fixed, meaning that changes in aggregate expenditures will lead to changes in real GDP, not in the price level. The other options are not assumptions of the model.

One Basic Assumption of the Aggregate Expenditures Model Is That