When the public sector is added to the aggregate expenditures model: A)the equilibrium condition becomes G + S = T + I_g + X. B)the equilibrium condition becomes G + T = S + I_g + X. C)the equilibrium condition becomes C_a + I_g + X_n + G + T = GDP. D)we add a new leakage in the form of taxes and a new injection in the form of government spending.

Question

Quizplus · Accepted Answer

Adding the public sector introduces taxes as a leakage and government spending as an injection in the aggregate expenditures model.

When the Public Sector Is Added to the Aggregate Expenditures