Aggregate expenditure
Aggregate expenditure
is a measure of national income, very similar to GDP. It is defined as the total value of annual goods and services production within a country (at market prices) counting only goods and services actually bought.
The Aggregates (logically, since exports must have been paid for). This is called
Net Export Expenditure (
export minus
import expenditure).
If a country's
economy produces more goods than are sold, the increase in inventory would generally be
included in the GDP figure, but
excluded from Aggregate expenditure, which measures only those goods and services
produced and actually purchased.
If an economy is in
macroequilibrium aggregate output (measured by GDP) and
aggregate expenditure will be equal. (Mainstream
microeconomic theories imply that GDP and
Aggregate expenditure will be close in real economies because inventory surpluses aren't sustainable at fixed prices. See also:
Say's law.) In fact, if the inventory level in the
supply sector is static, the GDP and
Aggregate expenditure numbers should, theoretically, be identical. (In practice, different measuring methods would create small discrepancies.)
Aggregate expenditure is focused on the
demand side of the economy, and is more commonly used by modern macroeconomic theorists than GDP.
