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The following equations relate to an open economy with a government sector. E = ...


Question

The following equations relate to an open economy with a government sector. E = aggregate expenditure on domestically produced goods, C = Consumption, I = Investment, G = Government expenditure, T = taxes, M = imports, X = Exports. Which equation is correct

Options

A)
E = C + I + G
B)
E = C + I + G + M – X
C)
E = C + I + G + X – M
D)
E = C + I + G – T + M – X

The correct answer is C.

Explanation:

The national income of a country can be estimated as aggregate expenditure, consumption, investment, government expenditure, export less import. Import will be deducted because it is the money paid on importation of goods from other countries.

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Dicussion (1)

  • The national income of a country can be estimated as aggregate expenditure, consumption, investment, government expenditure, export less import. Import will be deducted because it is the money paid on importation of goods from other countries.

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