Let us analyze each of the given statements about the Keynesian model one by one in order to identify the incorrect one:
1. Aggregate expenditures can be expressed as [tex]\( C + I + G + (X - M) \)[/tex]:
Aggregate expenditures encompass the total spending on an economy’s goods and services. This can be broken down into:
- [tex]\( C \)[/tex]: Consumer spending
- [tex]\( I \)[/tex]: Investment spending
- [tex]\( G \)[/tex]: Government spending
- [tex]\( (X - M) \)[/tex]: Net exports (exports [tex]\( X \)[/tex] minus imports [tex]\( M \)[/tex])
This is a fundamental equation in macroeconomics for calculating aggregate expenditures, therefore this statement is true.
2. GDP can be measured as the sum of all spending:
Gross Domestic Product (GDP) can be calculated using the expenditure approach, which sums up all expenditures in an economy:
- [tex]\( GDP = C + I + G + (X - M) \)[/tex]
Hence, this statement is also true.
3. The four main types of spending are consumer, investment, government, and net exports:
As described in the components of aggregate expenditures, the Keynesian model identifies these four categories. Hence, this statement is correct.
4. Aggregate spending is always less than aggregate income:
In the Keynesian model, aggregate expenditures should be equal to aggregate income because the total amount spent on goods and services in an economy (aggregate spending) should equal the gross income earned from producing these goods and services (aggregate income). Therefore, this statement is incorrect because aggregate spending equates aggregate income, not is less than it.
Given these analyses, the incorrect statement among the provided options is:
"Aggregate spending is always less than aggregate income."
This is the statement that is NOT true regarding the Keynesian model.
