_____ is the relation between total expenditures, or total spending, and the price level.
In a given amount of time, the company sells 200 cars at that price. Using this case, the expenditure total would be 20 multiplied by $20,000 USD, which comes to $400,000 USD. Of course, the amount of cars sold was not only determined by the price level at that specific time. When demand is elastic, a fall in the price of a commodity results in increase in total expenditure on it. On the other hand, when price increases, total expenditure decreases. It means, in case of highly elastic demand, price and total expenditure move in the opposite directions. Table 4.1: Highly Elastic Demand. International effects all reinforce a negative. relationship between the price level and. GDP. In other words, when the price level. increases, the quantity of GDP decreases. When the price level decreases, the quantity. of GDP increases. i.e. The Keynesian Theory. Keynes's theory of the determination of equilibrium real GDP, employment, and prices focuses on the relationship between aggregate income and expenditure. Keynes used his income‐expenditure model to argue that the economy's equilibrium level of output or real GDP may not corresPond to the natural level of real GDP. 2. Elasticity is less than One (Ed < 1): When demand is inelastic, a fall in the price of a commodity leads to fall in total expenditure on it. On the other hand, when price increases, total expenditure also increases. It means, in case of less elastic demand, price and total expenditure move in the same direction. The aggregate demand curve relates relative prices to the quantity demanded of a particular good. a. The aggregate demand curve shows the various levels of expenditures in the economy at alternative price levels. _____ is the relation between total expenditures, or total spending, and the price level. a. Gross National Product. The price elasticity of demand for a good and the total expenditure made on the good are greatly related to each other. At times, it becomes important to determine the effect on the expenditure on a good due to change in price of the good. Image Courtesy : outsidethebeltway.com/wp-content/uploads/2012/06/economy.jpg. In words, the equilibrium level of real GDP, Y*, is equal to the level of autonomous expenditure, A, multiplied by m, the Keynesian multiplier. Because the mpc is the fraction of a change in real national income that is consumed, it always takes on values between 0 and 1. Total expenditure is an economic term used to describe the total amount of money that is spent on a product in a given time period. This amount is achieved by multiplying the quantity of the product purchased by the price at which it was purchased. To calculate the total expenditure of a certain product at a given time, the quantity of the product sold and the price for which it was sold first need to be known. For example, imagine that a company sells cars and decides upon a price of $20,000 US Dollars (USD) for a single car.
Aggregate demand