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What are the components of aggregate expenditure?

The four components of aggregate expenditure are household consumption, denoted by “C,” plus investments (“I”), plus government spending, plus net exports (“NX”). It measures the aggregate spending activities of the overall economy and is also referred to as Gross Domestic Product (GDP).

To summarize,

Aggregate expenditure = C + I + G + NX.

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There are two sides to any transaction. There is a seller, and there is a buyer. To use an example, when you enter a store to purchase something, you are the buyer. The store, or its owner, is the seller. For instance, if you purchase a soft drink for $2.00, you have expended—or spent—$2.00, and in exchange, you have received a soft drink to consume.

Aggregate expenditure measures the aggregate spending activities of the overall economy. Aggregate expenditure, or Gross Domestic Product (GDP), consists of household consumption, which is denoted by “C,” plus investments, denoted by “I,” plus government spending (“G”), plus net exports (“NX”).

To summarize,

Aggregate expenditure = C + I + G + NX.

It calculates the total value of economic activities within the country's economy and is also called gross domestic product (GDP).

Household consumption is the amount that people or the general population spends. In the example above where you purchased a soft drink, you...

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