Planned Aggregate Expenditure (PAE)

11 important questions on Planned Aggregate Expenditure (PAE)

What are the four components of planned aggregate expenditure?

The four components are C, I, G, and NX.

What does C represent in planned aggregate expenditure?

C stands for consumption, which is household spending on goods and services.

What does I^p stand for in the context of PAE?

Planned investments made by firms regarding capital goods.
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What does G refer to in planned aggregate expenditure?

G indicates government spending on public services and infrastructure.

What is NX in planned aggregate expenditure?

NX indicates net exports, calculated as exports minus imports.

When does planned spending equal actual spending in PAE?

It occurs when what people plan to spend equals their actual spending.

How is PAE mathematically represented?

PAE = C + I^p + G + NX.

What is disposable income?

It's the remaining money households can use after paying taxes and receiving transfers.

How do you calculate disposable income?

The formula is Total Income (Y) minus Taxes (T).

What happens when there are declines in production?

Reduced spending occurs because workers earn less and households have lower income.

How does reduced spending affect production?

A decrease in spending results in firms selling less, leading to further production cuts.

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