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June 25, 2022 

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AGGREGATE EXPENDITURE DETERMINANT: A ceteris paribus factor that affects aggregate expenditures, but which is assumed constant when the aggregate expenditure line is constructed. Changes in any of the aggregate expenditures determinants cause the aggregate expenditure line to shift. While a wide variety of specific ceteris paribus factors can cause the aggregate expenditure line to shift, it's usually most convenient to group them into the four, broad expenditure categories -- consumption, investment, government purchases, and net exports. The reason is that changes in these expenditures are the direct cause of shifts in the aggregate expenditure line. If any determinant affects aggregate expenditures it MUST affect one of these four expenditures.

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INVOLUNTARY EXCHANGE:

The process of unwillingly trading one valuable commodity (good, service, or resource) for another, usually prompted by the coercive powers of government. The key term is "unwillingly," which distinguishes involuntary exchanges from voluntary exchanges, such as those that are the foundation of market transactions.
Involuntary exchanges are resource allocation activities imposed on the economy by government taxes, laws, and regulations. Unlike a voluntary market exchange, the "buyers" and "sellers" have little or no influence over the allocation decision. They pay the price, produce the good, or use the resources according to government mandates.

An Involuntary Exchange

Suppose, for example, that the Shady Valley City Commission imposes a 1 cent sales tax on all jogging shoes sold in the city. When Roland Nottingham buys a pair of jogging shoes for $75, the city collects 75 cents in sales taxes. The Shady Valley City Commission then decides to use this tax revenue, along with that collected from other jogging shoe sales, to erect a statue memorializing the career of former Mayor, Sylvester J. Peabody.

Roland is thus involuntarily forced to exchange his 75 cents for a portion of the Sylvester J. Peabody statue. This is a resource allocation decision that Roland would not have undertaken voluntarily. Roland did not like Mayor Sylvester J. Peabody. Roland did not like the political views held by Mayor Sylvester J. Peabody. Roland did not like any policy, program, or ordinance proposed by Mayor Sylvester J. Peabody. Roland would not have voluntarily paid for any part of a statue memorializing the career Mayor Sylvester J. Peabody.

But, as a taxpaying citizen of Shady Valley, Roland is forced to abide by the involuntary exchange imposed on him by the Shady Valley government.

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Recommended Citation:

INVOLUNTARY EXCHANGE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2022. [Accessed: June 25, 2022].


Check Out These Related Terms...

     | voluntary exchange | exchange | market |


Or For A Little Background...

     | allocation | three questions of allocation | efficiency | public sector | government functions |


And For Further Study...

     | private sector | capitalism | ownership and control | paternalism | political views | market | market equilibrium |


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