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Components of Aggregate Expenditure

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List the components of aggregate expenditure. Choose two of these components, and explain the composition of each.

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Solution Summary

This solutions discusses the components of Aggregate Expenditure (AE) based on the formula:
AE = C + I + G + (X - M)

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The Aggregate Expenditures Equation

The following equation is commonly used to summarize the four components that make up aggregate expenditures:

AE = C + I + G + (X - M)

The notation used here is relatively straight forward. AE is aggregate expenditures; C is consumption expenditures by the household sector; I is investment expenditures on capital goods by the business sector; G is government ...

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