1 aggregate expenditure what are the components of

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1. (Aggregate Expenditure) What are the components of aggregate expenditure? In the model developed in this chapter, which components vary with changes in the level of real GDP? What determines the slope of the aggregate expenditure line?

2. Why do you think investment spending is the most sensitive component of AD? Briefly discuss.

3. Why do you think an average American spends more than an average European? Briefly discuss.

4. (Changes in Aggregate Supply) What are supply shocks? Distinguish between beneficial and adverse supply shocks. Do such shocks affect the short-run supply curve, the long-run supply curve, or both? What is the resulting impact on potential GDP?

Reference no: EM13379472

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