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AGGREGATE EXPENDITURE LINE: A line representing the relation between aggregate expenditures and gross domestic product used in the Keynesian cross. The aggregate expenditure line is obtained by adding investment expenditures, government purchases, and net exports to the consumption line. As such, the slope of the aggregate expenditure line is largely based on the slope of the consumption line (which is the marginal propensity to consume), with adjustments coming from the marginal propensity to invest, the marginal propensity for government purchases, and the marginal propensity to import. The intersection of the aggregate expenditures line and the 45-degree line identifies the equilibrium level of output in the Keynesian cross.
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ASSUMPTIONS, CLASSICAL ECONOMICS Classical economics, especially as directed toward macroeconomics, relies on three key assumptions--flexible prices, Say's law, and saving-investment equality. Flexible prices ensure that markets adjust to equilibrium and eliminate shortages and surpluses. Say's law states that supply creates its own demand and means that enough income is generated by production to purchase the resulting production. The saving-investment equality ensures that any income leaked from consumption into saving is replaced by an equal amount of investment. Although of questionable realism, these three assumptions imply that the economy would operate at full employment.
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GRAY SKITTERY
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Today, you are likely to spend a great deal of time watching infomercials hoping to buy either a replacement washer for your kitchen faucet or a stretchable, flexible watch band. Be on the lookout for empty parking spaces that appear to be near the entrance to a store.
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The portion of aggregate output U.S. citizens pay in taxes (30%) is less than the other six leading industrialized nations -- Britain, Canada, France, Germany, Italy, or Japan.
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"A leader is most successful when people barely know he exists. When his work is done, his aim fulfilled, his troops will feel they did it themselves. " -- Lao-Tzu, philosopher
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