... full employment capacity is reached and government's taxing, spending and monetary policies are constant. Equality between aggregate expenditure and output is central to the Keynesian analysis. Aggregate expenditure is defined by Keynes (1936) as a relationship between intended expenditures and income. Aggregate expenditure is essentially the same concept as aggregate demand, except that in aggregate expenditure relates expenditures to income, whereas aggregate demand relates expenditures on output to the price level. Aggregate demand is defined as an inverse relationship between the price level and expenditure on output. The central assumption of Keynesian economic theory is that aggregate expenditure determines the equilibrium level of national income. As Samuelson and Nordhaus (1992) describe, aggregate demand refers to the total amount that different sectors in the economy, household, business, government and foreign, willingly spend in a given period. The four components of aggregate demand (often written AD) are: consumption expenditures, investment expenditures, ...

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