In economics, aggregate expenditure (AE) is a measure of national income. Aggregate expenditure is defined as the current value of all the finished goods and services in the economy. The aggregate expenditure is thus the sum total of all the expenditures undertaken in the economy by the factors during a given time period. It is the expenditure incurred on consumer goods, planned investment and the expenditure made by the government in the economy. In an open economy scenario, aggregate expenditure also includes the difference between the exports and the imports. Aggregate expenditures is defined as = Household Consumption = Planned Investment = Government spending = Net exports (Exports − Imports) Aggregate expenditure provides one way to calculate the sum total of all economic activity in an economy, which is referred to as the gross domestic product of an economy. The gross domestic product is calculated through the aggregate expenditure model, also known as the Keynesian cross. AE is also used in the aggregate demand-aggregate supply model which advances the aggregate expenditures model with the inclusion of price changes. Aggregate demand (AD) refers to the sum total of goods that are demanded in an economy over a period and thus AD is defined by the planned total expenditure in an economy for a given price level. Components Various schools of thoughts use various components to come up with the Aggregate Expenditure. The major schools of economic thought, which are the classical and Keynesian economists, use the following components: Consumption Consumption is the household consumption over a given period of time. The total household consumption can be divided into two parts: Autonomous Consumption and Induced consumption. Autonomous Consumption is the amount of consumption regardless of the amount of income; hence, even if income is zero, the autonomous consumption would be the total consumption. Induced consumption refers to the level of consumption dependent on the level of income. Investment Investment is the amount of expenditure on capital goods. Investment is the expenditure on goods that are expected to yield a return or increase their own value over time. Investment expenditure can be further divided into two parts, planned investment and unplanned investment. Over the long run the sum of differences in the unplanned investment would equal zero as economy approaches equilibrium. Government Expenditure The Keynesian model propagates an active state to control and regulate the economy. The government can make expenditure in terms