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Aggregate expenditure is defined as the total value of consumption, investment, government spending and the total value of net exports. To calculate aggregate expenditure we use the formula AE=C+I+G+(X-M)
AE is aggregate expenditure, or the measure of national income. C is consumption, or the action of using up a resource. I is investment, the action or process of investing money for profit. G is government spending, all government consumption, investment, and transfer payments. X is exports,
and M is imports, importation and exportation are the defining financial transactions of international trade.
Investment spending is money spent on capital goods, or goods used in the production of capital, goods, or services. It is an injection into the circular flow of income. It may include purchases such as machinery, land, production inputs, or infrastructure.

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AE=C+I+G+(X-M)
Define Aggregate Consumption

Aggregate expenditure is the total spending in an economy. It is made up of total consumption in the economy. total planned in the economy, total government spending in the economy and the net exports of the economy.

Aggregate consumption is the largest component of aggregate consumption making up 55%. There are numerous determinants of aggregate consumption. These are dispoable income,

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Aggregate expenditure is the total spending in an economy. It is made up of consumption, investment, government spending and net exports. (AE = C+I+G+(X-M). Consumption is the largest component of aggregate expenditure, making up 55%, while investment makes up 24%.

There are a number of factors that have a significant effect on consumption. One of the determinants is disposable income. This is the amount of income which can be used by households to either spend or save. High levels of disposable income would stimulate consumption, as the household would have more money to spend in the economy.
Consumer confidence is another determinant of aggregate consumption, when there is high and good confidence in the economy consumption will be high as they would be happy to spend. Low confidence in the economy would cause people to save rather than spend.

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Aggregate expenditure is the total value of consumption, investment, government spending and the total value of net exports. This is represented mathematically as AE=C+I+G+(X-M).

The determinants of AE are important in determining the variation of the factors from year to year and the factors that influence each component.
The determinants include consumption and investment spending.

Consumption spending- This includes spending on day to day items and household equipment. Spending on necessities is quite stable regardless of the business cycle. Durable, non durable goods and services are components of consumption spending. In 2012-13 Australia's GDP was just over $1400bn. Consumption is the largest component at 54%

Investment spending- Investemnet is expenditure on capital goods that are used to produce final goods and services in the future. Investment is very important but volatile. In 2012- 2013, private investment made up about 24% of GDP. This consists of fixed investment, residual fixed investment and changes in business inventories. Over the last 50 years, private investment has accounted for 11% up to 23% of Australias GDP.

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A key decision in the circular flow model we studied is how much households spend on consumption.  Consumption and income tend to be highly correlated.
If a household is earning a high income, they are more likely to consume luxury goods and consume more than they spend.

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Unleash THE Beast ie (Sonia and Sriharsha)

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Unleash THE Beast ie (Sonia and Sriharsha)

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Aggregate expenditure is defined as the total value of consumption, investment, government spending and the total value of net exports.
This is represented mathematically as AE=C+I+G+(X-M).

The First component of AE is consumption expenditure. Consumption expenditure makes up 55% of AE making it the biggest component. CE consists of durable and non durable goods and finally services. A durable good is a good that lasts for more than 3 years or more, examples of durable goods are washing machines and motor vehicles.15% of consumption are durable goods. A non durable good is a good that is consumed quickly such  as food, clothing and even holidays 35% of consumption are non durable goods . The final part of consumption is services which is 50% of aggregate consumption. Consumption levels are dependant upon how well the economy is performing, if the economy is performing well, there is more jobs, therefore people have more money and thus spend more increasing the level of consumption in the economy. If the economy is not performing well then people have less jobs, less income and therefore only spend on essential goods and services decreasing AC. The interest rate affect the level of consumption because they take up a higher proportion of a persons income as for mortgages and such.

Investment is Money spent on capital goods, or goods used in the production of capital, goods, or services. Investment spending may include purchases such as machinery, land, production inputs, or infrastructure. However there are factors that effect the level of investment expenditure. These factors are confidence, interest rates and finally

Confidence affects the level of investment because if the economy is performing poorly, companies don't know what will happen in the future and they don't know whether their investment is profitable.

Interest rates affect the level of

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Aggregate expenditure is the most common way we measure economic performance. AE=C+I+G+(X-M)
Consumption is a major contributor to AE. It is composed of services, consumption of durable goods and non-durable goods. Services account up to50% of AC and is the largest component. Consumption on non-durable goods contributes to 35% of consumption. Consumption of durable goods account to 15% of consumption.

DETERMINANTS of Consumption Expenditure
Factors include level of disposable income, interest rates, consumer confidence, and expectations. accounts to 50% of AE.
Disposable Income: income that is available to be spent or saved. The greater the level of disposable income the greater the consumption.
Interest rates: affect a persons mortgage and how much they borrow. The greater the interest rates the lower the level of Yd meaning a reduction in consumption. When interest rates are low spending on durable goods increase as people borrow more.
Consumer confidence and expectations: affects every economical decision in the economy. The views are shaped by past economic events e.g. interests rates. When consumer confidence is low consumers reduce spending.
Level of personal wealth: when one owns many assets they feel more economically safe to spend increasing consumption.

DETERMINANTS OF INVESTMENT EXPENDITURE
Expenditures made by the business sector on final goods and services, or gross domestic product, especially the purchase of productive capital goods. Is the most volatile component of AE and accounts to 11-26%.

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Aggregate demand is made up of multiple components that affect it in all different ways. Aggregate demand is made up of: Consumption + investment + Government expenditure + Net exports ( or AD = C + I + G + (X-M) ).  Consumption and investment are the two biggest factors affecting aggregate demand as they are consumption never stops as there is always demand for goods in the economy. Like wise investment is a major part of AD as a large part of our economy is based of business investment in overseas and national sectors.

There are many factors that effect the consumption in the economy. One of the biggest factors is disposable income. When consumers have high disposable income, I.e from a raise, they then have more money than there expenses take, so there is more money in the economy available to be used for consumption of goods.

Another factor in the economy is the consumer confidence. If the economy is in a boom period consumer confidence will be high and consumption will rise as people have more faith in the economy.

Also interest rates affect the consumption in an economy. If there is low interest rates in the economy, people will have to pay back less on their loans, increasing disposable income and therefore aggregate consumption.

General price levels in an economy also affect the consumption, Low price levels, in correlation to the business cycle, i.e a boom, will drive consumption as people can get more goods for less.

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-Define AE (AE=C+I+G+(X-M))
-Define AC
-Determinants
-Define investment
-Current spending in the economy
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Aggregate expenditure is defined as the total value of consumption, investment, government spending and the total value of net exports.
It is shown using the formula AE=C+I+G+(X-M)
Consumption is a major portion of expenditure of the economy at 55% of total AE, it is the total use of goods and services by households.  Investment is the purchase of goods that are not consumed today but are used in the future to create wealth. Investment is much smaller than consumption at 20% of total AE

The level of consumption can be determined by many factors. Disposable income is what ultimately drives consumption as it is the total income consumers have to spend on goods and services. An increase in disposable income would increase consumption as people have more money to spend. Consumer confidence in the economy has a major effect on level of consumption as it drives their incentive to purchase goods. If consumers are confident about their future income, job stability, and the economy is growing and stable, spending is likely to increase. However, any job insecurity and uncertainty over income is likely to delay spending. Interest rates also influences spending as low interest rates tend to increase consumption because larger goods are usually purchased on credit and if interest rates are low, then its cheaper to borrow. Consumers mostly borrow to buy houses, which is one of the biggest purchases and lower interest rates means lower mortgage payments, so households can spend more on other goods. Stock of wealth sends us into a false sense of security and we spend beyond means. If the value of peoples assets increase people feel as if they are richer and therefore can spend more on goods and services.

Investment in the economy are also influenced by factors in the economy. Similarly to consumption investment is largely influenced by interest rates. Firms borrow from banks to make large capital intensive purchases, and if the interest rate decreases, it becomes cheaper for firms to invest and provides incentive for firms to take risk. Confidence that business have in the economy affects their level of investment. If they are confident for the future they feel they can take the risk and invest in capital.

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Describe the determinants of aggregate consumption and investment spending in the economy 10marks

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Describe the determinants of aggregate consumption and investment spending in the economy 10marks