This is “Appendix B: Extensions of the Aggregate Expenditures Model”, appendix 2 from the book Macroeconomics Principles (v. 1.1). For details on it (including licensing), click here.
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Chapter 22 Appendix B: Extensions of the Aggregate Expenditures Model
In this appendix, we will extend the aggregate expenditures model in two ways. First, we will express the model in general algebraic form and show how to solve it for the equilibrium level of real GDP. The advantage of using general algebraic expressions in place of the specific numbers that we used in the chapter is that we can then use the results to solve for any specific value that may pertain to a given economy. Second, we will show how the aggregate expenditures model can be used to analyze the impact of fiscal policies on the economy.
