Can we tell from this information whether aggregate expenditure was higher or lower than GDP during this quarter? If not, what other information do we need? A. Aggregate expenditure was equal to GDP in this quarter. B. There is not enough information to determine the relationship between aggregate expenditure and GDP. C. Aggregate expenditure was less than GDP in this quarter. D. Aggregate expenditure was greater than GDP in this quarter.

Answer:B

The Answer to the question is D. which means that Aggregate expenditure was greater than GDP in this quarter 1970 - 2017. A 47-year long span analyses.

Explanation:

For an in-depth understanding of the analyses, let us understand the concepts of Aggregate expenditure (Demand) and GDP;

The Aggregate expenditure, or the total amount of spending in the economy, equals consumption spending plus planned investment spending plus government purchases plus net exports.

The Gross Domestic Product measures the value of economic activity within a country. Strictly defined, GDP is the sum of the market values, or prices, of all final goods and services produced in an economy during a period. GDP is a number that expresses the worth of the output of a country in local currency.

To support the above-mentioned option, here are the factors that stimulate the aggregate expenditure surpassing the GDP;

Private Consumption Spending - Increased for rising energy prices, rising consumer confidence, more jobs were created, increase the valuation of assets (stocks, bonds & real estate),

Planned Investment Spending - The Private Domestic Investment Spending increases because of the relatively low cost of capital (single digit), rising stock prices reduces the cost of capital to firms and this led to more investments, the rising corporate taxes were curbed by the increased spending of government on production subsidies, and the rising business confidence was a boost to investment.

Government Purchases - Government Expenditures increased for rising in natural disasters and wars (providing reliefs & steps up military spending), the World Economic Melt-down has led to increased spending, rising energy prices induce higher spending on government own consumption.

Net Exports - The Exports of American goods & services have reduced drastically because of the rising cost of production. The Asian Tigers, especially, the Chinese took advantage of the cheap cost of production to supply the economy with foreign goods and services. This incidence was what led to the current trade crises between the USA & China.