If the household budget constraint is aggregated over all household, it shows that:
A)consumption less net investment equal net national product.
B)consumption plus net investment equals real GDP less depreciation.
C)C - K = Y + K
D)all of the above.

Question

If the household budget constraint is aggregated over all household, it shows that:
A)consumption less net investment equal net national product. 
B)consumption plus net investment equals real GDP less depreciation. 
C)C - K = Y + K 
D)all of the above.

Quizplus · Accepted Answer

The household budget constraint for one household is C + S = Y, where C is consumption, S is saving, and Y is income. When this is aggregated over all households, it becomes C + I = Y + (G - T) - Dep, where I is net investment, G is government spending, T is taxes, and Dep is depreciation. This is equivalent to saying that consumption plus net investment equals real GDP less depreciation.

If the Household Budget Constraint Is Aggregated Over All Household