Answer to Question #82859 in Macroeconomics for Mary

Question

If there was an increase in personal incomes of the Nation this could result in

An increase in the GDP. Would you agree with this, yes or no and why?

Answer 1

According to the Keynesian model of aggregate expenditures, household expenditures take into account when calculating the size of GDP. Keynes noted that household income consists of consumption and savings, and with an increase in income, the share of consumption increases. Accordingly, an increase in household income, all other things being equal, will entail an increase in GDP.