How do changes in aggregate expenditures affect GDP?
Now click here to view an interactive exercise. This will open a new browser window. Then answer the questions below. This exercise is from the website for Begg and Ward Economics for Business. If you have clicked on the link above and cannot see the interactive exercise, you may need to install a free Java plugin for you internet browser. Click here for the plugin. The left side of the window shows the current level of taxes as well as the levels of each of the components of aggregate expenditures – C, Ig, G, and Xn – as they are related to the level of GDP. The right side of the window illustrates how these expenditures are combined to form the aggregate expenditures relationship. The consumption graph is drawn such that the marginal propensity to consume is 0.6 while investment, government spending and net exports are assumed to be independent of the level of GDP. To use the graph, click on and adjust any of the sliders adjacent to Investment (I), Government expenditure (G), Consump
