- Aggregate expenditure
In economics, Aggregate Expenditure is a measure of national income. Basically it is one of the approaches to measure GDP. It is defined as the value of planned goods and services produced in an economy. Where GDP is defined as C + I + G + NX and I = Ip + Iu (planned + unplanned investment), Aggregate Expenditures is defined as C + Ip + G + NX, where:
C= consumption (C)I= investmentG= government spendingNX= net exports (Exports-Imports)
AE (Aggregate Expenditure) is used in conjunction with GDP in the
Aggregate Expenditures Modelto predict future GDP direction. In this model, when AE = GDP then the economy is in equilibrium. According to this model an economy will move towards its equilibrium causing changes in the GDP.
Some textbooks choose to define aggregate expenditures as the sum of consumption and investment in a closed, private economy, dealing exclusively with amounts firms intend to invest, and not necessarily taking into account amounts that will actually be invested.
Components of Aggregate Expenditure (AE) - defined as the total amount that firms and households plan to spend on goods and services at each level of income. Also, it can be seen that the aggregate expenditure is the sum of expenditures on consumption, investment, government expenses and net exports. It is normally derived from all the components of the AD. For instance:
AD=C+I+G+X-M (function of price)AE=C+I+G+X-M (function of income) (DR Kevin LTL)
Wikimedia Foundation. 2010.
Look at other dictionaries:
Aggregate demand — This article is about a concept in macroeconomics. For microeconomic demand aggregated over consumers, see Demand curve. In macroeconomics, aggregate demand (AD) is the total demand for final goods and services in the economy (Y) at a given time… … Wikipedia
expenditure — noun ADJECTIVE ▪ considerable, great, heavy, high, huge, large, major, massive, significant ▪ The group is calling for higher … Collocations dictionary
aggregate demand — The sum of demands for all the goods and services in an economy at any particular time. Made a central concept in macroeconomics by J. M. Keynes (1883 1946), it is usually defined as the sum of consumers expenditure (see consumption), investment … Big dictionary of business and management
Aggregate behavior — In economics, aggregate behavior refers to relationships between economic aggregates such as national income, government expenditure and aggregate demand. For example, the consumption function is a relationship between aggregate demand for… … Wikipedia
aggregate — adj. Aggregate is used with these nouns: ↑effect, ↑expenditure, ↑output, ↑score … Collocations dictionary
Autonomous Expenditure — A macroeconomic term used to describe the components of an economy s aggregate expenditure that are not impacted by that same economy s real level of income. This type of spending is considered automatic and necessary, whether occurring at the… … Investment dictionary
commitments for capital expenditure — Expenditure on fixed assets to which a company is committed for the future. The aggregate amounts of contracts for capital expenditure not provided for in the accounts for the year and the aggregate amount of capital expenditure authorized by the … Accounting dictionary
Circular flow of income — In this simplified image, the relationship between the decision makers in the circular flow model is shown. Larger arrows show primary factors, whilst the red smaller arrows show subsequent or secondary factors. In economics, the terms circular… … Wikipedia
Complex multiplier — The complex multiplier is the multiplier principle in keynesian economics (formulated by John Maynard Keynes). The multiplier is a rather simplistic version of this. It applies to any change in autonomous expenditure, in other words, a change in… … Wikipedia
Labour economics — seeks to understand the functioning of the market and dynamics for labour. Labour markets function through the interaction of workers and employers. Labour economics looks at the suppliers of labour services (workers), the demanders of labour… … Wikipedia