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What happens when aggregate planned expenditure exceeds real GDP?
Wiki User
∙ 13y ago
If aggregate planned expenditure exceed real GDP, firms sell more than they planned to sell and end up with inventories being too low. vice versa if aggregate planned expenditure is less than real GDP, firms sell lessthan they planned to sell and end up with unplanned inventories.
Wiki User
∙ 13y ago
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On the aggregate expenditure graph if autonomous investment decreased by 10 billion what happens to the aggregate expenditure line and planned savings?
autonomous onvestment cant be decreased
What is the relationship between aggregate expenditure and real GDP?
There is a direct proportional relationship between aggregate expenditure and real GDP. Aggregate expenditure is actually equal to real GDP. This is different from the planned expenditure.
In the keynesian model of aggregate expenditure real GDP is determined by what?
The aggregate expenditure model relates aggregate expenditures, which is the sum of planned level of consumption + investment + government purchases + net exports at a given price level, to the level of GDP. The key word here is planned. GDP is the same as aggregate expenditures(AE) except for one difference. People, firms and governments don't always spend what they had planned. So AE differs from GDP in that it deals exclusively with amounts firms intend to invest, and not necessarily taking into account amounts that will actually be invested as in GDP Where GDP is defined as C + I + G + NX and I = Ip + Iu (planned + unplanned investment), Aggregate Expenditures is defined as C + Ip + G + NX. AE (Aggregate Expenditure) is used in conjunction with GDP in the Aggregate Expenditures Model to predict future GDP direction. In this model, when AE = GDP then the economy is in equilibrium. According to this model an economy will move towards its equilibrium causing changes in the GDP.
If aggregate planned expenditures are greater than total production?
GDP will decrease
Why does the real interest rate affect planned aggregate expenditure?
Because the interest rate affects opportunity cost of holding money/spending it. Higher interest increases the future value of current money, and this change the optimal allocation decision of it in the present. For example, the less valuable money is in the future, the more of it you would expect people to spend now.
On the aggregate expenditure graph if autonomous investment decreased by 10 billion what happens to the aggregate expenditure line and planned savings?
autonomous onvestment cant be decreased
What is the relationship between aggregate expenditure and real GDP?
There is a direct proportional relationship between aggregate expenditure and real GDP. Aggregate expenditure is actually equal to real GDP. This is different from the planned expenditure.
In the keynesian model of aggregate expenditure real GDP is determined by what?
The aggregate expenditure model relates aggregate expenditures, which is the sum of planned level of consumption + investment + government purchases + net exports at a given price level, to the level of GDP. The key word here is planned. GDP is the same as aggregate expenditures(AE) except for one difference. People, firms and governments don't always spend what they had planned. So AE differs from GDP in that it deals exclusively with amounts firms intend to invest, and not necessarily taking into account amounts that will actually be invested as in GDP Where GDP is defined as C + I + G + NX and I = Ip + Iu (planned + unplanned investment), Aggregate Expenditures is defined as C + Ip + G + NX. AE (Aggregate Expenditure) is used in conjunction with GDP in the Aggregate Expenditures Model to predict future GDP direction. In this model, when AE = GDP then the economy is in equilibrium. According to this model an economy will move towards its equilibrium causing changes in the GDP.
What is planned expenditure in government budget?
Planned expenditure is how much money a business plans to spend.
Plan and non plan expenditures by government?
The expenditure in plan head is planned like( salary,purchase, etc.) but in case of non-plan that is renomn planned expenditure (like administration expenditure,calamity,mischalaneous etc.)
What is planned savings?
Planned savings is the money you plan to save alongside your current expenditure . For example if your total expenditure of the week is going to be £15 and you have £20, your planned saving could be to save £5 as you have that left over.
If aggregate planned expenditures are greater than total production?
GDP will decrease
What is the meaning of reserves and surplus?
Amount appropriated out of earned surplus (retained earnings) for future planned or unforeseen expenditure.
Why is planned investment called an injection?
Planned investment is called an injection because it refers to new spending or investment that is added to the circular flow of income and expenditure in an economy. It injects additional income and spending into the economy, stimulating economic activity and potentially increasing aggregate demand. In contrast, unplanned changes in inventory levels are called leakages because they remove income and spending from the circular flow.
Why does the real interest rate affect planned aggregate expenditure?
Because the interest rate affects opportunity cost of holding money/spending it. Higher interest increases the future value of current money, and this change the optimal allocation decision of it in the present. For example, the less valuable money is in the future, the more of it you would expect people to spend now.
Project cost overrun?
Cost Overruns happen when the actual expenditure on your project exceeds the planned/allocated budget. Lets say you have budget to hire 3 people and due to some reason you hired 4 people, then your project budget can be expected to overrun within a few months of operation. Project Managers use processes called "control cost" to control project expeditures
Differences between cost control and cost reduction?
Cost Control - Taking Steps to ensure that the cost expenditure in the project is in line with what was planned during the planning phase. If the expenditure looks like exceeding the planned value, then steps are taken to reduce the cost to bring it back in line with the plan Cost Reduction - Taking steps to reduce the amount of money spent on any activity or project
