30.2 Equilibrium Expenditure

MyEconLab Concept Video

You are now going to discover how, with a fixed price level, aggregate expenditure plans interact to determine real GDP. We will study the relationship between aggregate planned expenditure and real GDP; and we’ll study the forces that make aggregate planned expenditure and actual expenditure equal.

But first we’ll return to the distinction between induced expenditure and autonomous expenditure.

Induced Expenditure and Autonomous Expenditure

Aggregate planned expenditure is the sum of induced expenditure and autonomous expenditure. Induced expenditure equals consumption expenditure minus ­imports. You’ve seen that consumption expenditure increases when disposable income increases. But disposable ...

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