According to the aggregate expenditure model in class, the primary determinant of consumption and saving is the aggregate expenditure determines the total amount that firms and households plan to spend on goods and services at each level of income.
We make the assumption that there are only two parts to aggregate expenditures: consumption and investment, in order to create a straightforward model. Real gross domestic product and real gross domestic income are interchangeable terms, as we discovered in the chapter on measuring total output and income. Gross domestic product and disposable personal income in this economy would be roughly equal if there were no government or foreign sector. To further simplify things, we'll suppose that retained corporate earnings (also known as retained earnings) and depreciation are both equal to zero. Therefore, for the purposes of this example, we presume that personal disposable income and real GDP are equal.
To know more about aggregate expenditure model, refer:
https://brainly.com/question/13770374
#SPJ4
