Aggregate expenditure is $200. Consumers pay $70 in net taxes and spend $80 on products and services. Consumer savings is $50.

Question

Quizplus · Accepted Answer

Aggregate expenditure is calculated as AE = C + I + G + NX, where C represents consumer spending. In this case, the consumer spending is $80, so C = $80. Net taxes are subtracted from this amount, so C + net taxes = $80 - $70 = $10. However, the question also tells us that consumer savings is $50, which means that consumers are actually saving $50 instead of spending it. This means that the actual value of C + net taxes is $30 ($80 - $50), but the aggregate expenditure is still $200. Therefore, I + G + NX must equal $170, and this is possible as long as the other components of aggregate expenditure (I, G, and NX) add up to $170.

Aggregate Expenditure Is $200