Consumption and the Aggregate Expenditures Model
Read this chapter to examine consumption and its determinants within the aggregate expenditures model. Consumption is the largest component of Aggregate Demand the United States, therefore, the factors that determine consumption, also determine the success of the economy.
13.3 Aggregate Expenditures and Aggregate Demand
- Explain and illustrate how a change in the price level affects the aggregate expenditures curve.
- Explain and illustrate how to derive an aggregate demand curve from the aggregate expenditures curve for different price levels.
- Explain and illustrate how an increase or decrease in autonomous aggregate expenditures affects the aggregate demand curve.
We can use the aggregate expenditures model to gain greater insight into the aggregate demand curve. In this section we shall see how to derive the aggregate demand curve from the aggregate expenditures model. We shall also see how to apply the analysis of multiplier effects in the aggregate expenditures model to the aggregate demand–aggregate supply model.