Aggregate Expenditure

Aggregate expenditure is best defined as:

• The total spending conducted by the 2 major sectors, households and firms.

• The total spending conducted by foreign residents for domestic products.

• The total expenditure on capital goods conducted by firms and households.

• The total expenditure on final goods produced by the 4 major sectors of the economy.

AE= C+I+G+(X-M). What does I stand for?

• Investment

• Interest rates

• Inflation

• Income

What is the best definition of investment?

• Putting money in houses, bank or shares to make more profit in the future.

• Buying capital equipment to produce goods and services and adding to inventories.

The different categories of consumption are spending on durable products, non-durable products and services. Which is the biggest component of consumption?

• Durable

• Non-durable

• Services

Consumption generally accounts for around ____% of AE.

• 45%

• 50%

• 55%

• 60%

Which of the AE components are the most volatile?

• Consumption

• Investment

• Government Spending

• Net exports

Which two components are affected by a change in interest rates?

• Consumption and government spending

• Consumption and Investment

• Investment and government spending

• Net exports and government spending

If a business has been quite profitable, it's likelihood of conducting investment:

• Increases

• Decreases

Say our economy is booming- lots of employment and output. The government needs to pay less welfare payments. This is an example of a _________ change in government expenditure.

• Discretionary

• Automatic

If our exchange rate appreciates (increases in value- it costs foreigners more to buy 1AUD), our net exports would?

• Increase

• Decrease