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ACTIVIST POLICY: Government policies that involve explicit actions designed to achieve specific goals. A common type of activist policy is that designed to stabilize business cycles, reduce unemployment, and lower inflation, through government spending and taxes (fiscal policy) or the money supply (monetary policy). Activist policies are also term discretionary policies because they involve discretionary decisions by government. A contrast to activist policy is automatic stabilizers that help stabilize business cycles without explicit government actions.

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AGGREGATE EXPENDITURES EQUATION:

An equation that summarizes the four aggregate expenditures on gross domestic product by the four macroeconomic sectors. In the study of Keynesian economics, this equation is commonly used to summarize the demand side of the macroeconomy. The aggregate expenditures equation actually comes in three different versions depending on how many of the four sectors and their expenditures are included.
The aggregate expenditures equation is the sum of the four aggregate expenditures (consumption expenditures, investment expenditures, government purchases, and net exports). This equation provides a short-hand notion that summarizes the demand side of the economy.

The general aggregate expenditures equation is:

AE=C+I+G+(X-M)
where: AE is aggregate expenditures, C is consumption expenditures, I is investment expenditures, G is government purchases, and X-M is net exports, exports (X) minus imports (M).

This particular version of the aggregate expenditures equation is for all four macroeconomic sectors (household sector, business sector, government sector, and foreign sector). In some circumstances reduced versions, with fewer sectors, are more useful. A three-sector version that includes the household, business, and government sectors is:

AE=C+I+G
And the simplest aggregate expenditures equation is for the two private sectors--household and business. It is specified as:
AE=C+I

<= AGGREGATE EXPENDITURES DETERMINANTSAGGREGATE EXPENDITURES LINE =>


Recommended Citation:

AGGREGATE EXPENDITURES EQUATION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: October 23, 2018].


Check Out These Related Terms...

     | aggregate expenditures line | two-sector aggregate expenditures line | three-sector aggregate expenditures line | four-sector aggregate expenditures line | derivation, aggregate expenditures line | slope, aggregate expenditures line | intercept, aggregate expenditures line | aggregate expenditures determinants | induced expenditures | autonomous expenditures |


Or For A Little Background...

     | macroeconomic sectors | consumption expenditures | investment expenditures | government purchases | net exports | aggregate expenditures | Keynesian economics | macroeconomics | household sector | business sector | government sector | foreign sector | national income | gross domestic product | effective demand | psychological law | consumption line | investment line | government purchases line | net exports line |


And For Further Study...

     | Keynesian model | two-sector Keynesian model | three-sector Keynesian model | four-sector Keynesian model | Keynesian equilibrium | injections-leakages model | two-sector injections-leakages model | three-sector injections-leakages model | four-sector injections-leakages model | aggregate demand | paradox of thrift | fiscal policy | multiplier |


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