Explanation The aggregate expenditure is the summation of all the individual expenditures in the economy from all the economic agents. There are mainly four agents which includes the households, businesses, government and the net exports. The household expenditures are made for the consumption and is denoted by C, the business expenditures are made for investment and is denoted by I, government expenditures is denoted by G, and the net exports is denoted by (X-M). The summation of all these expenditures in the economy is known as the aggregate expenditure of the economy. Option (b): The aggregate expenditure is the summation of all the expenditures made by the economic agents in the economy. The ratio of change in the GDP to an initial change in the aggregate expenditure in the economy is known as the spending multiplier. The formula to calculate the spending multiplier can be written as follows: Spending Multiplier = 1 1 − MPC Since the given Equation is the same, it means that the option 'b' is the correct answer

The formula to calculate the spending multiplier.

Economics For Today

10th Edition

ISBN: 9781337670654

Author: Tucker

Publisher: Cengage

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Chapter 19, Problem 9SQ

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The formula to calculate the spending multiplier.

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Chapter 19, Problem 8SQ

Chapter 19, Problem 10SQ

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