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In the aggregate expenditures model, it is assumed that investment___________.

A. does not change when real GDP changes.
B. changes by less in percentage terms than changes in real GDP.
C. does not respond to changes in interest rates.
D. automatically changes in response to changes in real GDP.

Respuesta :

Answer:

A. does not change when real GDP changes.

Explanation:

The aggregate expenditure model is the sum total of all the expenditure undertaken in the economy  by the factors during given period of time. It assumes that planned spending is equal real GDP and is given by marginal propensity to purchase. As increase income lead to increase in spending, however, we expect marginal propensity to spend to be less than 1. It also assume that only component of aggregate expenditure that may not be planned is investment.

Aggregate expenditue (AE)= [tex]C+I_p[/tex]

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