What is aggregate expenditure method?

What is aggregate expenditure method?

Under this method, we take the quantities of consumption of various commodities by a particular section of the people in the base year as weights. We then calculate the total expenditure of each commodity for each year.

What are the methods of consumer price index?

Following two methods are used to construct consumer price index numbers – i Family Budget method or weighted average of relatives method. ii Aggregative Expenditure Method.

Do aggregative expenditure method and family budget method always give?

(D) None Of These. The correct answer is (A) Same Results.

Which method is used for constructing consumer price index?

Aggregative Expenditure Method : This method is most popular method for constructing consumer price index numbers. The prices of commodities of current year as well as base year are multiplied by the quantities consumed in the base year.

What is the Keynesian cross model?

A Keynesian cross diagram shows three situations—one where output is greater than aggregate expenditure, one where aggregate expenditure is equal to output and one where output is less than aggregate expenditure.

What is the formula of laspeyres method?

The Laspeyres Index is calculated by working out the cost of a group of commodities at current prices, dividing this by the cost of the same group of commodities at base period prices, and then multiplying by 100. This means that the base period index number is always 100.

What is the another name of consumer price index number?

Consumer Price Index or CPI as it is commonly called is an index measuring retail inflation in the economy by collecting the change in prices of most common goods and services.

What is aggregate expenditure method in index number?

Aggregate Expenditure Method In this method, the quantities of commodities consumed by the particular group in the base year are estimated and these figures or their proportions are used as weights. Then the total expenditure of each commodity for each year is calculated.

What is fixed base method?

In fixed base method, a particular year is generally chosen arbitrarily and the prices of the subsequent years are expressed as relatives of the price of the base year.

What are the various methods studies under weighted aggregative method?

There are many methods to construct weighted index number such as Laspeyre’s method, Paasche’s method, Fisher’s method, Dorbish and Bowley’s method and Marshal and ‘ Edgeworth’s method.

How is aggregate expenditure related to aggregate output?

Since aggregate expenditure is the total spending on the economy’s total output, imports are subtracted from exports, since the amount spent on imports is the amount not spent on the economy’s output. Aggregate Expenditure = Consumption + Investment + Government Purchases + Net Exports.

What is the meaning of family budget?

A family budget is a plan for your household’s incoming and outgoing money over a certain period of time, such as a month or year.

What is chain base method?

⇒ In chain base method, the base period is : Notfixed. ⇒ In this method, there is no fixed base period; the year immediately preceding the one for which the price index has to be calculated is assumed as the base year.

What are the two method of Construction of index number?

In general, construction of index number is further available for the division in two parts: Simple and Weighted. Furthermore, the simple method is classified into simple aggregative and simple relative. Similarly, the weighted method is classified into weighted aggregative and weighted average or relative.

What is CPI and WPI?

> the wholesale price index (WPI) based inflation rate and. > the consumer price index (CPI) based inflation rate. The former is called the wholesale inflation rate and the latter is called the retail inflation rate. Both WPI and CPI are price indices.

Is curve and Keynesian cross?

In the Keynesian cross model, investment demand is exogenous. If investment demand is independent of the interest rate, then the IS curve is vertical. Aggregate demand sets the national income and product, regardless of the interest rate.

What is LM curve?

The LM curve depicts the set of all levels of income (GDP) and interest rates at which money supply equals money (liquidity) demand.

What is the Keynesian income expenditure model?

The income expenditure model of economics was developed by John Maynard Keynes to explain fluctuations in production of goods and services and spending. The model basically states that we produce as many goods as will sell on the market and fluctuations in production and expenditure are tied to keep an economy stable.