Question

Consider the fixed prices Keynesian macroeconomic model: What is the difference between planned expenditure and actual expenditure? How actual expenditure is related to real GDP? What happens when there is a difference between planned expenditure and real GDP? Answer

Answer 1

A planned expenditure is money money you you intended for expected to spend for instance we expected to spend $10,000 on new equipment to im poore our operations. Actual expenditure is how much you really spent. eg. we actually spent just $ 9000 for that equipment when we planned for $10,ooo so we sared ourselves it cowd ea دا اله@ our actual $1000 have gone the other way with . In this care Guo really spending more like $12,000 we would hare overspent by $2000. Te difference between what was planned and actual expenditure - variance. so from a budgeting standpoint keeping tabs on our variance heups w krud where things are and seem to be heading. It is either a surplus or defiest. A planned expenditure is what you think is needed to acliere a particwar objective, and the expenditure is the reality of what it really costs. agregate planned expenditure equal real GDP. the change in firms inventories is tu planned change. If agregate planned It agregate planned expenditure exceeds recall Crop, birms inventories are smalleo piannell it agreegate planned expenditure is ten than real copy tirros inventorien are larger than planned. The expenditure method is the most common way of calcw ating a country's Gop. This method adde up consumer spending, investment, government expenditure net exports Egreegate demand is equivalant to the expenditure the long-run. I b than and Ege otion for GPP in CS Scanned with CamScanner

expenditure method is He most widely wed approach tor estimating tor estimating ap, which is a measure economy's output produced with in a country's borders irrespective of who owns the means to production. of the for mcula for expenditure GDP is ct It G + (x-my T X COP-- where e = - consumer spending on gooch and service Investor spending on bwine capital good. G Government spending on public good and somice - exports m imports. According to the keynesian moder agregate Planned expenditure CPE) is determined as the sum ct planned consumption expenditure Co), pianned inne meet expenditur (I), planned government expenditure Com) next export (Nx). ana planred PE C+ I + GANX. In this moder consumption expencature is an endgersary variable, meaning that it varies with the level of cisposable income alich can be defined as total output (real GDP) less aggregate tuxes ory T. expenditure, goromment expenditure and be exogeneow variable in the model they do not vary with the camen lenes of be determined by extemal government policy and Kreina archanzo o Investment net exports are all set to meaning that real GDP anch 1( force such as so CS Scanned with CamScanner